Until this week, fans of Chelsea football club, owned by Roman Abramovich, were the most focused on how the oligarch would spend his cash. Following his purchase of a stake in Evraz, the Russian steel producer, Mr Abramovich has the full attention of steel investors too.

Russia’s steel sector has already consolidated, with five significant operators. Further domestic combinations are possible but are probably not the most pressing concern. The domestic market is expanding at an estimated 5-7 per cent a year. When growth eventually slows, the logic of in-market mergers will become more compelling. For now, further transactions to increase already well-advanced vertical integration are more probable.

Russian steel

What the industry really lacks is participation in high-quality, finished product markets. While domestic consumption is growing, it absorbs just half of production and exports are predominantly semi-finished products. Domestic mergers would provide scale, but are unlikely to improve Russian exporters’ bargaining position in commoditised, low-value markets.

More logical are purchases of overseas downstream assets higher up the value chain – such as the acquisitions made by Severstal and Evraz in Italy. Offering technology, distribution and liquid stock listings, Europe’s mid-sized steelmakers are attractive targets for cash-rich Russian producers. There is plenty of speculation about a Corus-Evraz deal brokered by Mr Abramovich but the high cost of moving Evraz slab to the UK is a tough obstacle.

Attempts at further deals on the scale of Arcelor-Severstal may be problematic. Shareholder resistance to the extent of the proposed transfer of control to Severstal’s main investor, Alexei Mordashov, has prompted concessions. Without a high level of Russian control it is not clear that the Kremlin will allow further assets to pass into foreign hands. Equally, European governments are sensitive about the ambitions of Russia’s resource companies. The Russians are coming, but only a bit at a time.

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