OREANDA-NEWS. On August 18, 2009 Metal Courier released its monthly update on Russian steel consumption. According to preliminary data, in July total domestic steel demand grew by 14% MoM (13% increase for flats, 15% for longs). Revised June data revealed an 11% MoM growth in local steel demand. Initially, only a 6% pick up was reported, reported the press-centre of OTKRITIE FC.

The revised figures include an impressive 16% boost in flats demand. Overall, for 7M09 steel consumption in Russia is down 45% YoY. In terms of production, Metal Courier sees Russian steel output rising 11% in July. In turn, prices are estimated to climb by as much as 10% MoM in August.

View: We believe that the data primarily reflects both favorable seasonality and the peak construction season (which could be seen in a larger increase in long and coated products volumes), rather than representing any sustainable recovery in underlying demand. The lack of the latter, in our view, remains the biggest restraining factor for the Russian steel stocks.

Although we believe that August and September will bring a further increase in domestic steel consumption, we continue to see export markets as the major driver of steel companies’ earnings in the short-to-medium term. In the sector, we reiterate our preference for Evraz, which combines a pronounced export focus with a solid domestic footprint. In addition, the company offers an attractive opportunity for taking advantage of opportunities accompanying the implementation of the US stimulus package.