Synopsis:
MMK anticipates a modest increase in steel production in 2024, largely due to the partial recovery of output at its Turkish plant, MMK Metalurji. Despite the challenging economic conditions in Turkey, the plant remains profitable. MMK Metalurji has a design capacity of 2.3 million metric tons and includes various manufacturing facilities.
Article:
Magnitogorsk Iron & Steel Works (MMK), a prominent Russian steelmaker, has announced its expectation of a modest growth in steel production for the year 2024. This projection is primarily attributed to the anticipated partial recovery of output at the company's Turkish plant, MMK Metalurji, as stated by Ilya Nechayev, MMK's deputy director for investor relations, on the Telegram channel Market Power.
In 2023, MMK produced a total of 12.99 million metric tons of steel, with 12.6 million metric tons originating from its Russian operations. However, production at the Turkish plant experienced a significant decline of 57.4%, resulting in an output of only 381,000 metric tons, as reported in the company's annual report.
Despite the challenging economic landscape in Turkey, MMK Metalurji has managed to remain profitable, according to Nechayev. While the company refrained from disclosing the plant's current profit margin and targets for the upcoming year, Nechayev expressed optimism regarding the recovery of sales volumes at the Turkish asset in 2024.
MMK Metalurji boasts an impressive array of manufacturing facilities, including an electric furnace melting shop with a casting and rolling facility, a cold rolling mill, a continuous hot dip galvanizing line, a polymer coating line, and a metal service center. The plant has a design capacity of 2.3 million metric tons, showcasing its significant production potential.
It is worth noting that MMK, its Turkish plant, and the group's controlling shareholder, Viktor Rashnikov, were included in the U.S. Specially Designated Nationals List (SDN List) during the summer of 2022. This development has undoubtedly posed challenges for the company's operations and international trade.
Regarding potential mergers and acquisitions, Yaroslava Vrubel, MMK's sustainable development and investor relations director, stated that integration in iron ore products is currently not feasible for the group due to the limited availability of assets and unattractive prices. Furthermore, MMK is not considering deeper integration in coal following its acquisition of the Tikhov mine.
On a positive note, Vrubel revealed that MMK's free cash flow is expected to surpass last year's figure of 30.7 billion rubles. Additionally, the company anticipates a 1-1.5% increase in steel prices on the domestic market in 2024, reflecting the impact of cost inflation.
Conclusion:
MMK's projection of modest steel production growth in 2024, driven by the partial recovery of output at its Turkish plant, MMK Metalurji, demonstrates the company's resilience in the face of challenging economic conditions. Despite the difficulties posed by the inclusion of MMK and its affiliates in the U.S. SDN List, the company remains focused on optimizing its operations and capitalizing on the potential of its Turkish asset. With a design capacity of 2.3 million metric tons and a diverse range of manufacturing facilities, MMK Metalurji is well-positioned to contribute to the group's overall production and profitability. As MMK navigates the complex global steel market, its commitment to sustainable development and strategic decision-making will be crucial in ensuring its long-term success.
Source: STEELGURU
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