Evraz mulls shorter week at parts of ZSMK steel mill

Reuters reported Russia's top steelmaker Evraz is considering cutting the working week to 4 days at parts of its ZSMK plant, one of Russia's largest mills, as the troubled steel industry heads into the slow summer season.

Sources with ties to the Siberian plant, which produced 7.3 million tonnes of steel and 6.3 million tonnes of rolled products in 2012, said that Evraz will either cut the working days at some parts of the mill, or cut workers' pay.

One source said that "They could even do both basically they're trying to cut costs as much as possible," adding that a decision was due on July 1st.

Like steelmakers around the world, Evraz has been struggling to cope with weak prices as a growth slowdown in China and Europe's debt crisis hit demand from the construction sector and other parts of industry.

Evraz posted a net loss of USD 335 million in 2012 compared with over USD 400 million profit the previous year and said that they expected to cut spending in 2013 by around 10 percent from the USD 1.3 billion spent the previous year.

A spokesman for Evraz said that the firm was looking at various ways of cutting costs at a tough time for the steel industry. Shifting some personnel to working a shorter week is one way of controlling costs, which at the moment we are considering in relation to administrative and management staff only.

However, the sources added that it is the steel-producing and processing divisions of ZSMK that could see their week cut, with rolling facilities unaffected.

Mr Boris Krasnojenov analyst of Renaissance Capital said that "They've probably not got enough orders in front of the slow season. Sometimes its more cost effective to shrink the weeks than to keep producing to build inventories."

According to BCS analyst Mr Oleg Petropavlovsky, hard times lie ahead for Evraz starting in August, the end of the season when prices usually fall.

Mr Petropavlovsky said that "Evraz might have to cut capex this year to less than USD 1 billion from the planned USD 1.1 billion, the market may also come under further pressure in the third quarter when several companies introduce new production capacity.”