Boston, MA -- (SBWIRE) -- 08/15/2013 -- Russia's metals sector will face slow growth in 2013 as the eurozone crisis drags on and metals prices weaken. We expect production of key metals to remain modest, with company investment plans focusing on improving processing plant efficiency and reducing costs rather than building new plants or expanding production capacity. Despite the weak growth, Russia will remain one of the world's largest producers of key base and industrial metals such as nickel, steel and aluminium.

The Russian steel industry has been grappling with high inflation, tight credit cycles and high interest rates. Opportunities may have beckoned in light of the huge drop in iron ore prices over the past year; however, steel prices have also dropped significantly as the global economic outlook remains bleak. The main drags on global economic growth include: the US, the world's largest economy, continuing to experience a sluggish recovery; China, the second largest economy in the world, seeing a continued slowdown over the course of 2013; and finally, the eurozone sovereign debt crisis and its protracted negotiations for reform and proposals for future growth remaining uncertain, keeping businesses and investors wary.

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In 2012, Russia's accession into the World Trade Organization (WTO) took effect. Although on the surface the move will boost the Russian metals industry's image on the world trade stage, entrance into the world body does not come without downside risks to the sector. Industry trade group Russian Steel's president, Vladimir Lisin, has indicated that steelmakers are anticipating tough competition, anti-dumping investigations and a reduction in steel exports and raw materials consumption, as cited by Russia Beyond The Headlines. Metals producers' profits have shrunk in recent years due to the steady rise in the prices of natural gas and electric power.

Oligopolies To Remain In Place

Russian metals output is heavily consolidated within each metal produced, as restrictive foreign ownership rights and established oligopolies prevent foreign competition. Within nickel production, Norilsk Nickel is the primary producer and also a major mining company. Its vertical integration across mining and refining capacity will allow it to remain the largest nickel producer in Russia for the foreseeable future. Similarly, steel and aluminium production are consolidated among just a few producers. We do not expect the metals sector to diversify significantly over our forecast period.

Relying On Europe For Export Dependence

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