15 September ‘20

MMK aims to support healthy competition in the metal products market

MMK's top manager presented an analysis of the current situation on the metal products market. This situation is characterised by the strong impact of the pandemic: metal consumption in Russia decreased by 8.4% year-on-year (y-o-y) for the first 7 months of 2020, affecting all types of metal products. However, after passing the lowest point of the decline in Q2 2020, consumers have rapidly adapted to the new working conditions and increased efforts to restore the previous pace of work.  

Mr Ushakov noted that the most likely scenario for future developments is continued market recovery to pre-crisis levels. This trend is tied, in particular, to state support for the economy, namely the implementation of national projects, support for mortgage lending and multi-family real estate, programmes for the renewal of the Russian Railways fleet, state support for the machine-building sector and stimulation of the automotive industry. Nevertheless, it is estimated that the overall level of metal consumption in Russia may not reach pre-crisis levels until mid-2021.

In this situation, the new reality in the metal market may open up new opportunities for development, particularly through the expansion of MMK's interaction with metal processors in the current period.

The flow of MMK deliveries to large chain metal trading companies, regional traders and metal service centres is characterised by consistently high volumes. About 50-60% of MMK's sales to traders and metal service centres go to independent companies. According to Mr Ushakov, this is an optimal proportion, since the share of sales through its own sales network (around 40% or slightly higher) supports healthy competition in the market. In this case, a more objective assessment of the market situation and benchmarking of one’s own trading house with the strongest market participants is possible and necessary for further development and increased competitiveness.

Since MMK's main specialisation is in the production of all types of flat products, approximately 75% of its delivery volume to metal traders and metal service centres consists of flat products, including metal products with coatings. The remaining 25% comprises long products. In the regional context, the main volumes of MMK and Lysvensky Metallurgical Plant’s supplies are directed to the Urals (33%), due to their geographical location, and the Central region (24%) as the most metal-intensive region of the country.

For MMK, one of the main tasks of selling products through its own sales network – MMK Trading House – is to promote products to end users with whom the manufacturer does not have direct contracts (for reasons of low-tonnage orders, inability to credit and others). MMK Trading House has a well-developed warehouse network consisting of 30 sites in all the leading metal-consuming regions of Russia, as well as five branches in Kazakhstan. In this way, MMK Trading House promotes the plant's products to small businesses, strengthens its position in the end-user segment, and develops market niches, such as high-strength and wear-resistant rolled products. MMK Trading House's network covers both the most metal-intensive and remote regions and has wide opportunities for export to CIS countries and prospects for import substitution, which ensures constant promotion of MMK products inside and outside the country. Since 2014, MMK's sales through MMK Trading House have grown by 31%. The plant's sales network has repeatedly won awards at the main all-Russian competitions for metal suppliers – "Best Metal Base in Russia", "Best Metal Service Centre in Russia" and "Best Sales Network in Russia" – and is also a winner of the "Competitive Sales Leader" award in the "Import Substitution" category.

Speaking about MMK's key tasks in the metal trade and metal service centres market, Mr Ushakov highlighted the Company's efforts to maintain healthy competition in the market by establishing a rational proportion of sales through its own sales network and through independent companies; to carry out timely analysis and evaluation of MMK Group sales activities in constantly changing market conditions in order to make possible further adjustments; and to continuously develop and improve the competitiveness of its own sales network in any economic and epidemiological conditions.

The 11th annual conference "Russian Metal Service Centres 2020" is taking place on September 14-15 in two formats: offline (for those who are able to attend in person in Magnitogorsk) and online (for those who watch the presentations and listen to speakers online). The event is organised by Metallosnabzhenie I Sbyt (Metal Supply and Sales) Information and Publishing Service with the support of MMK, M-Steel Group and Ural Metalworking Company. The conference will be attended by top managers of metal service centres, manufacturers of metal products, suppliers of raw materials for processing rolled products, companies that develop equipment for metal service centres, metal trading companies, industry unions, research institutes and engineering design bureaus. Topics for discussion at the conference include developments in the processing of flat, long and pipe rolled products in Russia; the development of sales markets for metal service centre products and promising niches for the introduction of new types of metal products, and other relevant topics for the Russian metal processing market.

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