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. Last Updated: 07/27/2016

Evraz to Put $1.8Bln Into New Output

Evraz Group, a steelmaker part-owned by Roman Abramovich, will spend $1.8 billion to boost domestic output amid record demand for building materials and railroad track.

Evraz plans to increase production more than 40 percent through 2011, adding 3 million tons of steel products at new plants in Russia and Kazakhstan, and upgrading existing ones in Siberia and the Ural Mountains, chief financial officer Pavel Tatyanin said Wednesday at a conference in Moscow.

Five of the country's biggest steelmakers, from Novolipetsk Steel to Severstal, have pledged investments totaling more than $21 billion as Russia embarks on a $570 billion program to overhaul and expand transport infrastructure. After stagnating in the last decade, Russian sales of steel products, such as reinforced bars for concrete and sections used in construction, rose as much as 32 percent last year, Evraz said.

"We are very bullish on the Russian steel market," Tatyanin said. "Today's demand has fundamental reasons to continue growing."

Much of the government's expansion plan will go on the steel-based railroad network, the world's largest, as national monopoly Russian Railways pursues its biggest modernization drive since the Soviet era.

Evraz's expansion includes adding 580,000 tons of wheel-making capacity and 950,000 tons of rail at its Nizhny Tagil plant. The company will boost capacity at its Novokuznetsk mill by 750,000 tons of rail and 400,000 tons of rebars and wire rods.

Russian Railways plans to buy at least 1.2 million tons of track per year for the next two decades. Evraz sold 850,000 tons of rails to the company last year at $680 per ton, or almost $600 million.

Lehman Brothers and UBS this month recommended that investors buy shares in the country's steel producers, saying growth in domestic consumption will average 9 percent per year through 2015, driving up prices and profits.

Evraz will also build a $100 million sections mill at the site of the Kostanaisk diesel engine plant, in Kazakhstan, about 200 kilometers south of Chelyabinsk, and spend $80 million setting up a facility in the Irkutsk region to make reinforced steel. The two will have 1 million tons of capacity.

The steelmaker's biggest investment will involve adding a heavy plate mill at the ZabSib plant in western Siberia. Evraz will spend $500 million to add 800,000 tons in 2010 and later another 400,000 tons of capacity, Tatyanin said.

Together, the projects should reduce "tight" domestic supply and alleviate the need to impose export duties, which the government has proposed, Tatyanin said. Prime Minister Vladimir Putin said last week that the government might lower import tariffs on steel goods that are not produced much in Russia.

n Magnitogorsk Iron & Steel, the country's third-largest steelmaker, will invest more than $7 billion in the next seven years to double output in the country to 13 million tons of steel products, managing director Boris Dubrovsky said Wednesday.