Ukrainian mining group and steel producer Metinvest plans to shift its investment focus from iron ore to steel for the rest of this decade, as it sees value moving back from the raw material to the alloy.
The company is planning to boost its steel production to 25 million tons by 2020 from 15 million tons per year currently while it is not planning to increase its iron ore production over the same period.
Mr. Kostantin Golovko, the company head of strategic planning, said “By the end of this decade value is going to move back to steel and away from raw materials, as we think steel prices are going to perform better than raw materials”.
He said that “Clearly the steel industry is going through a really difficult time because of low levels of consolidation and overcapacity. A lot of steelmakers are in the red and we see this continuing for 3 or 4 years”.
He added “But the industry is now going through a self-healing period, where less is invested in expansion capacity utilization will grow again and will increase the steel producers’ pricing power. We believe steel margins will improve”.
Mr. Golovko said, Metinvest, which is currently self-sufficient for about 200% of its iron ore needs, is not looking to expand in iron ore. Its current production level will be enough to make it 100% self-sufficient once it has implemented the planned steel expansion.
Metinvest sees iron ore prices slowly falling from around $140-150 currently to $120-130 a ton by 2020 and then stabilize around this level.
It is however, currently a bit short when it comes to coking coal, another steelmaking ingredient and it is looking to increase its self-sufficiency in this material. (Reuters)