Annual Report 2010 - Magnitogorsk Iron & Steel Works

Russian MarketMMK maintains its leadership on the Russian steel market.GRAPH 3In 2010 MMK's share of the Russian market increased to 17% from 16% in 2009, driven by sales from the 5,000mm Plate Mill. GRAPH 4Other6%ChMK4% 5% 7%NTMK3% NLMKZSMK Uralskaya StalIn 2010 steel consumption in Russia grew by 38%compared to 2009, reaching a total of 36.6 mtonnes. MMK increased its Russian sales by 47%,which is higher than the growth of consumption inRussia. In terms of physical volumes,MMK's domesticshipments were on a par with 2008 levels.MMK's largest customers on the Russian market arepipe makers, machine builders and the constructionsector (70% of the sales).GRAPH 46500600055005000450040003500300025002000Structure of the Russian Steel Market in 201029%35.4 26.6 36.600.96.2Imports14%GRAPH 5MMK's domestic sales, m t0.24.217%GRAPH 315%MMK5.42008 2009 2010MMK'sshare17% 16% 17%Internal consumption, m tonnesMMK sales without Plate MillPlate MillSeverstal7000600050004000300020001000MMK strives to become astrategic supplier of steel forRussia's major sectoral customers.Pipe Making IndustrySectoral Sales Structureof the Russian Market2008 2009 2010OtherRegional distributionConstruction11%26%11%15%37%+47%12%18%12%21%37%Machine-buildingPipe-makingIn 2010 Russia experienced a surge of demand forpipes, which totalled 9.6 m tonnes, 63% higher thanin 2009. The surge was driven by demand from the oiland gas sector, construction and machine building.GRAPH 5Russian pipe-makers increased their productionto 9.1 m tonnes (+33%) while reducing exports(-39%). Nevertheless, there was a shortfall, which wascompensated by increased pipe imports (+139%).GRAPH 6Prices on the Russian pipe market are practicallyalways higher than international market prices, whichis attractive for imports (specifically, from Ukraine).The Russian market has a partial protection fromimports in the form of quotas and high import duty ondeliveries above quotas.34