The risks to the financial stability of metallurgical companies are increasing, the Center for Strategic Research noted in a review titled “How Steel Was Cooled”.
Domestic demand and prices for most types of ferrous metallurgy products are falling, which is rapidly worsening the financial performance of companies, the Center for Strategic Research notes and warns: “If strict monetary conditions, declining demand, and low prices persist, the problems of high debt loads of metallurgical companies outside the top-3 (Severstal, NLMK, MMK) will increase, which could lead to a new wave of major restructurings to prevent company bankruptcies.”
The situation in some enterprises in the industry is already close to critical, the Center for Strategic Research writes. It cites the example of “Mechel”, which, due to falling demand, announced a temporary shutdown of one of its plants from February 1st.
Over the 11 months of last year, metallurgists attracted 2.7 trillion rubles in loans, mainly short-term, and also restructured debts. “This, in fact, is a transition to the model of ‘patching holes’ – using short-term refinancing to maintain working capital,” the Center for Strategic Research writes.
“The industry is entering a survival mode,” the center’s analysts continue: the safety margin of many companies outside the top-3 may be exhausted in the near future (The Moscow Times).
