Investors in steel and mining giant Evraz, which is 30% owned by Roman Abramovich, owner of Chelsea FC, have seen some excellent returns since the start of the year. Evraz shares have been on a blast since 22 January, up from 447 at their low point to a high of 667 on 18 April.
Evraz stock has come off slightly since 18 April, but investors are hoping that CEO Aleksandr Frolov has more to offer from the Russian steel and mining conglomerate.
Evraz sits on top of a number of different companies active in steel, ore and coal. Its operations are not restricted to Russia either, as it has companies active in Canada, the United States and South Africa. The focus has always been on raw materials and steel, along with some logistical support for those industries.
Ironically there had been some heavy selling of Evraz shares on the London market in Q4 last year, but since then funds have been buying into the stock, and helping to push the share price up. There have obviously been concerns about how the Russian steel sector is faring under the sanctions regime imposed on Russia, but steel exports are still doing well as demand remains strong in some developing economies in Asia.
Global steel market concerns for Evraz
Chinese steel manufacturers are known to be struggling however. China has been producing cheap steel for decades and much of this was consumed locally, but now its steel plants have been seeking to flood overseas markets. The quality of Chinese steel has been criticised by some factories, and its exports have come under focus from the US as the Trump administration seeks to rebalance the American trading relationship with China.
Steel dumping could be a problem for Evraz going forward, especially as China is seeking to link some of the loans it is making as part of its One Belt, One Road program to purchases of Chinese steel for infrastructure projects. Russian steel plants will have to compete against Chinese steel prices in key markets like Central Asia and India.
On top of this there is the expected slowdown in the auto market, which is being felt by steel makers everywhere. Chinese steel giant Baosteel reported this month that the first contraction in China’s car market in 30 years is impacting its ability to shift steel.
Some of the major shareholders in Evraz, including Abramovich and non-executive director Eugene Shvidler, sold approximately 1.8% of the company on the open market at 595. This was at the end of March, just before the end of the financial year, so could be seen as a routine crystalisation of profits rather than a major profit take.