Page 108 - Russia OUTLOOK 2023

The uptick has been driven by surprisingly strong growth in domestic
construction, which made up three quarters (75%) of demand, and pipes
(12%).

Residential development projects have remained largely unaffected by the war
in Ukraine and the leading companies in the sector have been reporting strong
results. The demand for steel in construction was up 1.2% y/y in the period.

The growth in demand for pipes was even stronger, up 40% y/y in the period,
and this demand is likely to remain very high for the foreseeable future as
Russia needs to re-orientate its entire gas pipeline infrastructure from Europe
(70% of the current capacity) to Asia as a result of the sanctions.

“The main bright spot has been the energy sector, where several
mega-projects have pumped up demand for pipe,” BCS said in a note. “Some
notable examples are Gazprom’s pipeline initiatives, as well as local
gasification programmes and Rosneft’s Vostok Oil. However, the most
important steel demand driver has always been construction, which has
remained on a growth path thus far.”

BCS GM asks whether the current trend is sustainable, as the numbers of
square metres additionally planned and that already have permissions granted
has been flat y/y. At the same time, manufacturing, which consumes about the
same amount of steel as pipes, has also been very weak this year. With the
risk of a construction slowdown in 2023 the future remains uncertain for the
steel sector.

108 Russia OUTLOOK 2022 www.intellinews.com