America’s post-crisis reindustrialization and rail projects have provided greener pastures for Evraz, but now Russia’s largest steel producer will suspend operations at a Delaware plant after a sharp fall in metals prices and weak market conditions.
The Claymont, Delaware, mill will wind-down operations over the
next two months and nearly all of the plant’s 375 employees will
be laid off. The company is evaluating different scenarios under
which it can reopen the 500,000 ton-capacity plant.
Evraz, America’s number one rail producer, said that it doesn't
expect a financial loss tied to the closure, and current Claymont
customers will be served by one of the other seven operational
production units in North America, five in Canada, and two in the
US states of Oregon and Colorado, where demand for rail is high.
"Unfortunately, market conditions continue to be challenging
and low market visibility makes it difficult to foresee when
positive changes will occur,” executive Vice President John
Zanieski said in a statement on October 14.
“Fundamentally, [the closure] confirms the problem of the steel market and shows the damaging effects when Russian steelmakers expand abroad,” Kirill Chuyko, head of equity research at BCS, a Moscow-based investment firm, said.
In the first half of 2013, Evraz net income decreased by 21
percent, or nearly $939 million due to the sharp price decline in
coal, metals, and other raw materials, which have hit mining and
steel companies, many of which are Russian.
Evraz is headed by Chelsea football team owner and billionaire
Roman Abramovich, whose personal fortune has declined with falling steel product prices,
which, as a basket, have dropped by 3.4 percent since the
beginning of September.
“Even though steelmakers receive the most profit from Russian
sources, they continue costly foreign expansion, in part, for
political reasons,” said Chuyko.
Steel demand in Europe has waned, and declined 9 percent in 2013
and could drop 3 percent this year, while demand in North America
grew by 8 percent in 2012 and is slated to increase 1.5 percent
in 2013, according to Morgan Stanley, Bloomberg reported.
Russian steel and coal group Mechel, which has accumulated over
$9.5 billion in debt, is planning to sell its last American asset- Bluestone coal
company by November.
Analysts predict the trend will continue if steel prices don’t
improve, both abroad and in Russia.
Norilsk-Nickel, the world’s largest nickel and palladium
producer, is currently jettisoning its foreign and non-core
assets and focusing on the Russian market.
Construction in Russia will account for 60 percent of steel use
this year, compared to 27 percent in EU nations, according to
Morgan Stanley. By 2016, Russia will be Europe's largest car market.
China- the world’s largest coal consumer also isn’t showing
promising signs for Russian investors, as growth remains stunted.
Evraz Claymont produces sheet steel. In the first half of 2013,
they produced 171,500 tons. In 2012 production totaled 348,000
Evraz North America has 18 processing plants in Canada and the US
which annually average an output of over 5 million tons of