April 24, 2020 / 11:41 AM / a month ago

Russia's Severstal cuts capex forecast as coronavirus hits demand, prices

MOSCOW, April 24 (Reuters) - Russian steelmaker Severstal has cut its 2020 capital expenditure forecast by 15%, saying on Friday it expected a drop in domestic demand as the coronavirus pandemic spread.

“We recently took the decision to suspend part of our 2020 investment projects, and to change the financing schedule for some of them,” Chief Executive Alexander Shevelev said in a video statement after Severstal released first-quarter results.

The company, which had planned to spend $1.7 billion this year, has reduced its forecast to $1.45 billion, Severstal’s chief financial officer, Alexey Kulichenko, said on a call.

Severstal, which on Friday reported first-quarter core earnings were down 16% year-on-year to $555 million, had previously said it could reduce its planned capital expenditure by 30%-40% if market conditions worsened.

It now expects lower domestic demand, despite growth at the start of the year, due to gross domestic product (GDP) contraction and the introduction of strict measures to prevent the spread of the coronavirus pandemic.

Domestic demand would fall by 5%-7% this year, analysts at Aton forecast.

Severstal, which lowered its output by 6% in the first quarter to 2.85 million tonnes, was still seeing volumes of shipments at a level leading to full capacity utilisation, Kulichenko said.

“For us the alternative of volume distribution is export, and even marginal orders of export at the moment are still profitable for the company to take them,” he added.

“At the moment we stay competitive. As a result, we see full utilization for April, we see it for May. We very much expect it for June as well,” Kulichenko said. (Reporting by Anastasia Lyrchikova and Anna Rzhevkina; Writing by Polina Ivanova; Editing by Alexander Smith)

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