The need for repair work at its production plants in Russia and Canada could not have come at a worse time for Evraz.
It has blamed the repairs for a sharp drop in its steel output, but the company, which is 31 per cent-owned by Roman Abramovich, who controls Chelsea football club, said that it hoped to bounce back once ZSMK, its Siberian mill, had returned to full capacity.
The plant in Novokuznetsk is one of the world’s largest, turning iron ore into more than 100 finished steel products, including railway lines.
Evraz produced 3.3 million tonnes of crude steel in the three months to the end of June, 9.5 per cent less than at the start of the year but 4.2 per cent higher than a year ago.
Production also fell at the FTSE 250 company’s North American plants as it made repairs to a mill in Saskatchewan, Canada.
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“Results came in weaker than expected, but positive third-quarter production outlook together with a strong steel market environment is more important,” Oleg Petropavlovskiy, an analyst at BCS Investment Bank analyst, said in a note.
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Evraz said in February that it had halted four years of operating losses by making an operating profit of $463 million. The company has not paid a dividend since 2014.
Steelmakers in Russia, the world’s fifth-biggest producer, have been hit hard by a global slump in demand. Slowing growth in China, which creates and uses almost half of the global steel supply, has brought an end to two decades of rapidly rising world steel production. Global output has barely changed since 2013, according to the World Steel Association.
Evraz said yesterday that it had sold construction steel for $499 per tonne in the past three months, better than the $419 asking price a year ago but far below the price of $740 in 2011. Semi-finished steel and railway products have been through similar declines.
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Russian producers are also facing a sluggish domestic economy, which emerged from a two-year recession this year, and anti-dumping action in the United States and Europe.
The European Commission is said to be planning to raise tariffs on hot-rolled steel from several countries, including Russia. It already imposes duties of up to 73.7 per cent on Chinese steel. The G20 has held talks about tackling the world’s oversupply of the metal.
Shares in the company fell 5½p, or 2.3 per cent, yesterday to 232¾p.