Severstal Slows Production, Considers Work Force Cuts

Severstal is this month slashing production by 25 percent to 30 percent at plants in Russia, Italy and the United States as the global financial crisis hits demand for its products.

The company, majority owned by billionaire Alexei Mordashov, is also considering whether job cuts are needed as it joins the ranks of international steelmakers battling a sharp reduction in orders from the construction and automotive sectors.

"We will need to balance the work force with production. We have not yet finalized this assessment," spokeswoman Olga Antonova said Friday.

Russian steel giants, which have spent record profits snapping up assets all over the world, have lost more than three-quarters of their value since peaking in May and are coming under more pressure as consumers tighten their belts.

Severstal, the country's largest steelmaker, said in a statement that it would cut October output at its U.S. and Italian mills by around 30 percent. Its flagship plant in Cherepovets will reduce crude steel production by 25 percent this month.

The company, which this year posted a record first-half profit of $1.94 billion, also said it was reviewing its full-year guidance. In September, it forecast full-year 2008 crude steel output of 23 million tons, which would be a 31 percent rise.

"We consider these measures to be prudent management in a time of rapidly changing market conditions," chief financial officer Sergei Kuznetsov said in the statement.

"We are maintaining close discussions with our customers to support their near-term requirements."

Severstal follows rival Magnitogorsk Iron & Steel Works in cutting production. Magnitogorsk has said it will reduce October rolled steel output by at least 15 percent and could shed 3,000 jobs at the country's biggest steel plant.

Severstal stopped short of announcing job cuts.