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. Last Updated: 07/27/2016

Steelmakers Urged to Look Home

Domestic steel producers should become less export-oriented and focus more on domestic sales, but the sluggish growth of steel-consuming sectors is hampering that potential, a senior government official said Tuesday.

Russia is the world's second-biggest steel exporter.

Buoyed by booming global steel prices, Russian producers have so far sought to work more closely with foreign customers rather than domestic car and machinery makers, many of whom are still struggling to overcome the postSoviet production slump.

"There are two key directions: either press on with exports and face their eventual decrease as domestic resources become depleted, or actively focus on domestic sales," said Andrei Deineko, head of the Industry and Energy Ministry's industry department.

"Both producers and the government intend to take the latter path. ... But the most important problem is the insufficient development of the steel-processing industries within Russia," he told a metals conference.

Steel accounts for around 20 percent of Russia's total exports, making it the country's most lucrative source of export revenues after oil.

But while the construction industry is booming as Russia upgrades its infrastructure, production of cars, planes and ships remains below Soviet levels.

Deineko said domestic industrial consumers buy less than 50 percent of Russian-made commodity-grade ferrous metals and less than 20 percent of non-ferrous metals. Russia produced around 54 million tons of rolled steel in 2004.

Speaking on the sidelines of the conference, however, Deineko said that some steel majors had already started to refocus on sales at home.

"That process has already started, and in the past three years domestic [consumption] has grown from 23 million tons to 28 million tons," he said.

For example, Magnitogorsk Iron and Steel Works raised domestic steel sales by 241,000 tons in 2004, while the share of exports in its total steel output shrank to 51 percent from 53 percent a year earlier.