Evraz mulls shorter week at parts of ZSMK steel mill-sources

Thu Jun 27, 2013 11:54am EDT

Related Topics

* Firm eyes slashing working week to four days at key mill

* Top steelmaker hit by decreased demand

MOSCOW, June 27 (Reuters) - Russia's top steelmaker Evraz is considering cutting the working week to four days at parts of its ZSMK plant, one of Russia's largest mills, sources told Reuters on Thursday, as the troubled steel industry heads into the slow summer season.

Sources with ties to the Siberian plant, which produced 7.3 million tonnes of steel and 6.3 million tonnes of rolled products in 2012, said Evraz will either cut the working days at some parts of the mill, or cut workers' pay.

"They could even do both -- basically they're trying to cut costs as much as possible," one source said, adding that a decision was due on July 1.

Like steelmakers around the world, Evraz has been struggling to cope with weak prices as a growth slowdown in China and Europe's debt crisis hit demand from the construction sector and other parts of industry.

Evraz posted a net loss of $335 million in 2012 compared with over $400 million profit the previous year and said they expected to cut spending in 2013 by around 10 percent from the $1.3 billion spent the previous year.

A spokesman for Evraz said the firm was looking at various ways of cutting costs at a tough time for the steel industry.

"Shifting some personnel to working a shorter week is one way of controlling costs, which at the moment we are considering in relation to administrative and management staff only."

However, the sources said it is the steel-producing and processing divisions of ZSMK that could see their week cut, with rolling facilities unaffected.

"They've probably not got enough orders in front of the slow season...Sometimes its more cost effective to shrink the weeks than to keep producing to build inventories," said Renaissance Capital analyst Boris Krasnojenov.

Hard times lie ahead for Evraz starting in August, the end of the season when prices usually fall, according to BCS analyst Oleg Petropavlovsky.

"Evraz might have to cut capex this year to less than $1 billion from the planned $1.1 billion," he said, adding that the market may also come under further pressure in the third quarter when several companies introduce new production capacity.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.