The European Commission launched an investigation into Severstal, which was accused of dumping. The investigation will concern rolled products made of iron and steel, the prices for which set by Severstal in the domestic market are higher than in the foreign market. The EU also proposes to introduce an anti-dumping duty on hot rolled steel against Severstal in the amount of € 17.6.
How dangerous is this investigation for Severstal and how does it threaten the company’s shares? Alexey Kalachev, an analyst at the FINAM Group, answered the question of Fortrader magazine.
– The anti-dumping investigation into European supplies of Severstal, which was launched by the European Commission at the request of the European Steel Industry Association (Eurofer), has a limited negative impact on the company’s shares. Steel exports to Europe account for 1/5 to a quarter of Severstal’s revenue. Companies are no stranger to operating in foreign markets under the protectionist measures that governments use regarding steel imports almost everywhere and almost always.
The new claims date back to a period when steel prices in Europe were low due to the pandemic, while prices in Russia remained relatively stable. Now the situation has changed dramatically, and the price of hot rolled products on export markets is close to multi-year highs. Therefore, the threat from this investigation does not seem significant now.
First, Severstal expects to challenge the charges with numbers in hand. And secondly, the current steel prices more than fully compensate for the potential damage, even if the applicants manage to achieve a significant increase in the duty on the company’s products.
In any case, the attempt to reduce Severstal shares based on the information about the start of the anti-dumping investigation was actually bought out by the market, and the quotes returned to the level before its publication.
We believe that Severstal shares remain attractive to investors, have the potential to continue growing and provide shareholders with a good dividend yield.