russia through a lens | 3q 2016

Deloitte Research Centre | Fourth issue | 3Q 2016

Russia through a lensMacroeconomic outlookKey Russian macroeconomic indicators in 3Q 2016

Page 04

Steel and iron market report 2016Depreciating Russian rouble offsets financial losses of steel-makers2

Top steel producers – 2015Worldwide and in Russia

Page 14

Recommended visitPractical conference on corporate innovations and Tech Days

Page 19

02

Russia through a lens

Content

04Russia in figuresMacroeconomic outlook (GDP, inflation, trade indicators, currency rate, Central Bank key rate, top-pricing, etc.).

12Research Centre market analysisSteel and iron market report.

18Global windTop news about Sino-Russian relations.

17Top M&AsTop-5 deals in Russia.

Page 04 Page 12 0

We are pleased to present the latest edition of Russia Through a Lens, the macroeconomic journal produced by Deloitte Research Centre in Moscow.

Established in December 2015, the journal is published quarterly and falls under the Research Centre’s monitoring activities.

In Russia Through a Lens, we focus on current key trends in the Russian economy and present our research key findings.

If you have any questions or suggestions regarding this research, please do not hesitate to contact us:[email protected]

Designed by the Deloitte Design Group, Moscow

mailto:cisresearchteam%40deloitte.ru?subject=


03

Russia through a lens | Russia in figures

04

Russia in figuresGDPGDP per year

150, 000

130, 000

110, 000

90, 000

70, 000

50, 000

30, 000

10, 000

0

21,609.826,917.2

25%

33,247.5

24% 24%

41,276.8

–6%

38,807.2

19%

46,308.5

29%

59,698.1

12%

66,926.9

6%

71,016.7

10%

77,945.1

4%

–3.7%80,804

–0.6%

80,319.5

50%

30%

10%

–10%

–30%

–50%

–70%

–90%

–110%

–130%

0.7%1.3%3.5%4.3%4.5%–7.8%

5.2%8.5%8.2%

The data for the period from 2011 includes changes related to the implementation of the international methodology for housing services evaluation; to the evaluation of capital consumption, taking into account its current market value; to the conformation of data on exports and imports with the data presented

in the balance of payments developed according to the methodology provided by the Sixth Edition of the Balance of Payments and International Investment Position Manual (BPM6) introduced by the International Monetary Fund.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F

3Q GDP

Forecasts for 2016:

25,000

20,000

15,000

10,000

5,000

7,2768,903

11,54210,411

12,086

15,66417,442

18,54320,407 21,294 21,337

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F*

Ministry of Economic Development

Central Bank

Russian academy of sciences institute of economic forecasting (IEF RAS)

Standard & Poors

A. Kudrin, ex-Minister of Finance

Gaidar Institute

International Monetary Fund

JPMorgan

-0.6%-0.3% to - 0.7%

-1.0% -1.3% -1% -2% -1.2% -0.6%

Additional information:

• Ministry of Economic Development forecasts in Q3 2016 is lower than in Q2 2016: +0.6% in 2017, +1.7% in 2018, +2.1% in 2019.

• The Central Bank forecasts +0.5 to 1% and the IMF forecasts +1% in 2017.

• Institute of Economic Forecasting of the Russian Academy of Sciences (IEF RAS) forecasts in 2017: +1.5% in 2018: +2.2%

GDP, bln RUB

GDP, bln RUB

GDP growth (at current prices) GDP volume indicesSource: Rosstat, Ministry of Economic Development (forecast)


05

InflationInflation, %

Forecasts:

Source 2016

International Monetary Fund 6.6%

World Bank 5.9%

Gaidar Institute 6.5–7.0%

Gaidar Institute (Consumer Price Index) 7.7%

Inflation in August in 2016: 6.9 percent*Inflation target in 2017: 4 percent**

*The inflation figure is the consumer price growth rate over the corresponding month of the previous year.**The inflation target is set for the consumer price growth rate over the corresponding month of the previous year (Central Bank).

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.02006 2007 2008 2009 2010 2011 2012 2013 2014* 2015 2016 2017 2018 2019 2020

9.0

13.3

8.8

8.8

6.16.6

6.5

12.94

12.2

5.8 4.94.4

4.144

6

Rosstat (Fact) Central Bank (forecast) Ministry of Economic Development (forecast)

11.911.4


06

Trade structurePeriod Jan-Apr 2016

Imports from non-CIS countries (period Jan-Jul 2016):

Source: Federal Customs Service

Imports from CIS countries (period Jan-Jul 2016):

• Foreign trade turnover: USD 249,4 billion (-20,8 percent YoY)

• Trade balance: surplus of USD 57,8 billion (-USD 30,8 billion YoY)

• Exports: USD 153,4 billion (-27,1 percent YoY)

• Imports: USD 95,6 billion (-8,0 percent YoY)

Percentage in imports from non-CIS countries

In monetary terms

In physical terms

Categories

Textiles and footwear 6.1% –7.3% –9.6%

Metal products 5.5% –11.4% –11.7% • Ferrous metals (– 10.7%)

Chemical products 20.0% –3.7% 3.8% • Varnishes and paints (–5.6%) • Plastics (–1.9%) • Pharmacuticals (–3.8%)

Machinery and auto 47.9% –5.1% n/a

• Optical instruments and apparatus (–0.4%) • Mechanical equipment (–7.3%) • Cars (–27.5%) • Trucks (–19.1%)

Food and raw materials for food production

13.3% –10.2% –10.8%

• Beef (–22.5%) • Fish (–13.8%) • Cheese and curd (–19.6%) • Citrus plants (–6.2%)

Percentage in imports from CIS countries

In monetary terms

In physical terms

Categories

Energy products 4.2% –71.0% –16.6%

Metal products 12.9% –8.8% 8.6% • Pipes (38.2%) • Flat–rolled iron or non–alloy steel products

(22%)

Chemical products 14.6% –21.4% n/a

• Products of organic chemistry (23.1%) • Plastics (22.5%) • Pharmacy (14.6%) • Varnishes and paints (52%)

Machinery and auto 23.3% 0.7% n/a

• Mechanical equipment (–10.9%) • Electrical equipment (–12.6%) • Optical instruments and apparatus (–26.4%) • Cars (–45.0%) • Trucks (83.3%)


23.2% n/a 9.2%

• Pork (–83.1%) • Poultry (–15.9%) • Butter (–5.2%) • Cheese (23.8%) • Milk (1.2%)

Textiles and footwear 7.8% 24.9% 39.1%


07

Exports to non-CIS/CIS countries (January-July 2006-2016)



Exports to CIS countries (period Jan-Jul 2016):

Percentage in exports to CIS countries

In monetary terms

In physical terms

Categories

Energy products 34.8% –36.0% –3.9%

• Oil products (–15%) • Coal (–2.8%) • Electrical energy (–36%) • Natural gas (–17.7%)

Metal products 12.0% –16.3% –9.8% • Ferrous metals (–10.3%) • rolled iron (6.8%) • Copper and copper alloys (11.6%)

Chemical products 16% –5.0% 13%

• Pharmaceuticals (15%) • Products of inorganic chemistry (13.9%) • Products of organic chemistry (9.3%) • Fertilisers (26.6%) • Plastics (–7.4%) • Rubber (13.1%)

Machinery and auto 14.1% –33.3% –36.80% • Mechanical equipment (–18.3%) • Electrical equipment (–5.8%)


10.8% –8.1% –0.4% • Fish (13.5%) • Cheese and curd (5.8%) • Sunflower oil (11.4%)

Timber, pulp and paper products 4.5% –12.3% –10.9%

• Lumber (–22.1%) • Plywood (–4%) • Newsprint (–8.4%) • Cellulose (–8.8%)

Exports to non-CIS countries (period Jan-Jul 2016):

Percentage in exports to non–CIS countries

In monetary terms

In physical terms

Categories

Energy products 62.2% –34.3% 1.8%

• Crude oil (6.2%) • Oil products (–12.6%) • Coal (9.1%) • Natural gas (11.8%)

Metal products 10.1% –22.3% 3.4%

• Copper and copper alloys (–7.6%) • Aluminum (4.8%) • Semi–finished iron or non–alloy steel

products (3.4%)

Chemical products 6.4% –28.0% –5.5%

• Products of inorganic chemistry (6.4%) • Fertilisers (–7.6%) • Plastics (–13.2%) • Pharmaceuticals (–20.7%) • Rubber (4.8%)

Machinery and auto 6.5% –6.4% n/a • Mechanical equipment (–41.6%) • Electrical equipment (9.3%) • Optical instruments and apparatus (33.8%)


4.7% 7.3% 27.40%

Timber, pulp and paper products 3.5% 14.4% n/a

• Lumber (23.9%) • Plywood (16.5%) • Cellulose (2.6%) • Rough wood (9%) • Newsprint (–4.8%)

Percentage in Exports to non-CIS countries Percentage in Exports to CIS countries

80

70

60

50

40

30

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jul

34.839.5

54.2

42.343.6

55.3

40.947

53

35.5

66.266.473

69.673.472.772.4 74.5

70.86870.3

44


08

EUR-RUB USD-RUB

Source: Central Bank of Russia


1009080706050403020100

1-Ja

n-14

1-Fe

b-14

1-M

ar-1

4

1-A

pr-1

4

1-M

ay-1

4

1-Ju

n-14

1-Ju

l-14

1-Au

g-14

1-Se

p-14

1-O

ct-1

4

1-N

ov-1

4

1-D

ec-1

4

1-Ja

n-15

1-Fe

b-15

1-M

ar-1

5

1-A

pr-1

5

1-M

ay-1

5

1-Ju

n-15

1-Ju

n-15

1-Ju

l-15

1-Au

g-15

1-Se

p-15

1-O

ct-1

5

1-N

ov-1

5

1-D

ec-1

5

1-Ja

n-16

1-Fe

b-16

1-M

ar-1

6

1-A

pr-1

6

1-M

ay-1

6

1-Ju

n-16

1-Ju

l-16

1-Au

g-16

1-Se

p-16

100.00

80.00

60.00

40.00

20.00

0.00

70.14

Q3 2015 Q3 2015

63.00

September 2015

September2015

75.04 66.78

Q3 2016 Q3 2016

72.1264.61

+3%+3% –4% –3%

September 2016

September2016

72.3664.56

RUB vs. EUR and USD, Jan 2014 – Sept 2016

Currency rate

USD-RUB forecasts (average per year)

EUR-RUB forecasts (average per year)


Ministry of Finance

Gaidar Institute, Ranepa and RFTA (base scenario)

Apecon (Economic Forecasting Agency)

IEF RAS

2016 RUB 67.5 RUB 67,6 RUB 64 RUB 66.1

2017 RUB 65.5 RUB 64.8 RUB 64.1 RUB 72 RUB 62

2018 RUB 65 RUB 64.1 RUB 63.4 RUB 78 RUB 62

2019 RUB 64.4 RUB 62.7 n/a n/a

IEF RAS

2016 RUB 72.7

2017 RUB 68.2

2018 RUB 68.2

Euro US dollar


09


Source: Moscow Exchange

Central Bank of Russia key rate, %

Indexes (daily): August 2014 – September 2016

Central Bank key rate

31-Ja

n-14

28-F

eb-1

4

31-M

ar-1

4

30-A

pr-1

4

31-M

ay-1

4

30-Ju

n-14

31-Ju

l-14

31-A

ug-1

4

30-S

ep-1

4

31-O

ct-1

4

30-N

ov-1

4

31-D

ec-1

4

31-Ja

n-15

28-F

eb-1

5

31-M

ar-1

5

30-A

pr-1

5

31-M

ay-1

5

30-Ju

n-15

31-Ju

l-15

31-A

ug-1

5

30-S

ep-1

5

31-O

ct-1

5

30-N

ov-1

5

31-D

ec-1

5

31-Ja

n-16

29-F

eb-1

6

31-M

ar-1

6

30-A

pr-1

6

31-M

ay-1

6

30-Ju

n-16

31-Ju

l-16

18-A

ug-1

6

30-S

ep-1

6

31-A

ug-1

4

30-S

ep-1

4

31-O

ct-1

4

30-N

ov-1

4

31-D

ec-1

4

31-Ja

n-15

28-F

eb-1

5

31-M

ar-1

5

30-A

pr-1

5

31-M

ay-1

5

30-Ju

n-15

31-Ju

l-15

31-A

ug-1

5

30-S

ep-1

5

31-O

ct-1

5

30-N

ov-1

5

31-D

ec-1

5

31-Ja

n-16

29-F

eb-1

6

31-M

ar-1

6

30-A

pr-1

6

31-M

ay-1

6

30-Ju

n-16

31-Ju

l-16

18-A

ug-1

6

30-S

ep-1

6

10%

20.018.016.014.012.010.08.06.04.02.00

Bank of Russia will be equal to the key rate of the Central Bank of Russia set at the respective date.

From 1 January 2016, the Central Bank of Russia will not set a separate value for the refinancing rate of the Central Bank of Russia.

The refinancing rate is 10 percent (from 19 September 2016).

In accordance with a decision of the Board of Directors of the Bank of Russia, effective 1 January 2016, the value of the refinancing rate of the Central

MICEX Index, RUB RTS Index, RUB

2100

1900

1700

1500

1300

1100

900

700

500


10

Nickel

Top-pricing (nickel, gold, aluminium)

Nickel forecast:

Source 2016 2017

Goldman Sachs USD 8,500 USD 10,000

Morgan Stanley USD 8,629 USD 9,921

World Bank USD 9,200 USD 10,029

IMF USD 8,506 USD 8,532

Source 2016 2017

Morgan Stanley USD 1,269 USD 1,300

Barclays USD 1,100

HSBC USD 1,205

World Bank USD 1,250 USD 1,219

Goldman Sachs Group USD 1,280 USD 1,250

Source 2016 2017 2018

Goldman Sachs Group USD 1,450 USD 1,400 USD 1,350

World Bank USD 1,575 USD 1,626 USD 1,679

Morgan Stanley USD 1,543 USD 1,620 USD 1,764

21,000

19,000

17,000

15,000

13,000

11,000

9,000

7,000

Maximum for the period

12-year minimum

13,98014,677

15,911

18,325

19,25019,040

18,50518,800

16,26515,740

16,275

15,15015,165

14,095

12,395

13,95012,600

12,01511,040

10,060

1-Ja

n-14

1-Fe

b-14

1-M

ar-1

4

1-A

pr-1

4

1-M

ay-1

4

1-Ju

n-14

1-Ju

l-14

1-Au

g-14

1-Se

p-14

1-O

ct-1

4

1-N

ov-1

4

1-D

ec-1

4

1-Ja

n-15

1-Fe

b-15

1-M

ar-1

5

1-A

pr-1

5

1-M

ay-1

5

1-Ju

n-15

1-Ju

l-15

1-Au

g-15

1-Se

p-15

1-O

ct-1

5

1-N

ov-1

5

1-D

ec-1

5

1-Ja

n-16

1-Fe

b-16

1-M

ar-1

6

1-A

pr-1

6

1-M

ay-1

6

1-Ju

n-16

1-Ju

l-16

1-Au

g-16

1-Se

p-16

1-Ja

n-14

1-Fe

b-14

1-M

ar-1

4

1-A

pr-1

4

1-M

ay-1

4

1-Ju

n-14

1-Ju

l-14

1-Au

g-14

1-Se

p-14

1-O

ct-1

4

1-N

ov-1

4

1-D

ec-1

4

1-Ja

n-15

1-Fe

b-15

1-M

ar-1

5

1-A

pr-1

5

1-M

ay-1

5

1-Ju

n-15

1-Ju

l-15

1-Au

g-15

1-Se

p-15

1-O

ct-1

5

1-N

ov-1

5

1-D

ec-1

5

1-Ja

n-16

1-Fe

b-16

1-M

ar-1

6

1-A

pr-1

6

1-M

ay-1

6

1-Ju

n-16

1-Ju

l-16

1-Au

g-16

1-Se

p-16

10,33010,045

8,8558,820

8,6108,530

8,495

9,425

8,4659,315

10,635

9,77010,795

Gold forecasts:

Aluminium forecasts:

Source: Finam Holdings

2,300

2,100

1,900

1,700

1,500

1,300

1,100

900

1,706

1,246

1,3291,285

1,289

1,2511,328

1,2841,288

1,2071,1741,151

1,7541,784

1,8001,829

1,8911,988

2,097

1,950

2,0372,014

1,8531,864

1,8151,785

1,920

1,7401,691

1,6201,605

1,5721,481

1,449

1,5011,572

1,521

1,672

1,557

1,6261,640 1,615

1,673

1,501

Gold and aluminium

1,1831,284

1,2141,187

1,1821,192

1,1741,095

1,1421,114

1,142

1,0711,061

1,122

1,2451,233

1,295

1,2171,323

1,357

1,3131,328


Minimum for the period

Gold, COMEX, $/t oz Aluminium, LME, $/t

Nickel, LME, $/t Source: Finam Holdings


11

Natural gas forecasts:

Crude oil forecasts:

120

100

80

60

40

20

0

6

5

4

3

2

1

0

Brent oil, natural gas


Minimum for the period

Source 2016 2017 2018

U.S. Energy Information Administration

USD 42.54 USD 51.58

World Bank USD 43 USD 53.2 USD 59.9

Central Bank of Russia Base scenario: USD 40


Base scenario:

USD 41 USD 40 USD 40

Standard & Poors USD 42.5 USD 45 USD 50

Gaidar Institute

USD 41 USD 40 USD 40

USD 42.5 USD 45 USD 50

USD 36 USD 42 USD 51 to 2021

European Central Bank USD 42.8 USD 47.4 USD 50.6

Goldman Sachs USD 43 USD 53

IEF RAS USD 44 USD 55 USD 59.3

Top-pricing (oil, gas)

Source: Finam Holdings Natural gas, NYMEX, USD/mmbtu Brent crude oil, ICE, USD/bbl

Source 2016 2017 2018

World Bank USD 2.3 USD 3 USD 3.5

Standard & Poors USD 3 USD 3.25

1-Ja

n-14

1-Fe

b-14

1-M

ar-1

4

1-A

pr-1

4

1-M

ay-1

4

1-Ju

n-14

1-Ju

l-14

1-Au

g-14

1-Se

p-14

1-O

ct-1

4

1-N

ov-1

4

1-D

ec-1

4

1-Ja

n-15

1-Fe

b-15

1-M

ar-1

5

1-A

pr-1

5

1-M

ay-1

5

1-Ju

n-15

1-Ju

l-15

1-Au

g-15

1-Se

p-15

1-O

ct-1

5

1-N

ov-1

5

1-D

ec-1

5

1-Ja

n-16

1-Fe

b-16

1-M

ar-1

6

1-A

pr-1

6

1-M

ay-1

6

1-Ju

n-16

1-Ju

l-16

1-Au

g-16

1-Se

p-16

4.94.6 4.4

4.84.6

4.43.8 4.0

4.1

3.94.0

2.7 2.7 2.7 2.7 2.5 2.3 2.3 2.4

1.7

2.72.6

2.82.9

106

1.9542.14 2.283

2.9562.8682.836

3.017

2.2

109108 108 109112

68

5362

55

67 6563 52

48 50 45 38 3637 40

4750 5043 47 49

53

106103

95 86

58

Russia through a lens | Research Centre market analysis

12

Research Centre market analysisSteel and iron market report 2016

In 2016, political and economic events have continued to have a lasting effect on the global metals market. Instability and the resulting lack of confidence can be felt both locally and internationally.

The trends from 2015 have resulted in metal products oversupply and weaker demand that has triggered a further decrease in steel prices, with prices in the steel and iron market hitting a 10-year low:

• In 2015, the global output was down 2.8 percent to 1,613 million tonnes*

• In 2015, the global consumption of steel was down 3 percent to 1,500 million tonnes.*

During the first five months of 2016, global steel output was 667 million tonnes, down 1 percent on the same period in 2015.

Although the manufacturing geography has generally remained the same, the amount of steel produced by the top-10 leaders over the first five months of 2016 is down 2 percent.

The Indian steel-making industry has seen the highest growth rate in 2016. In May 2016, India produced over 8 million tonnes of steel, up 4.9 percent on the same period in 2015.

Despite a global decrease in steel consumption, some regions have seen an increase, with African countries taking the lead. In addition to Africa, ASEAN countries also witnessed an 8 to 9 percent growth

*Net financial result is defined based on accounting data for all business operations of entities, representing a difference between profit (+) and loss (-) arising out of the sales of products (work or services), property, plant and equipment, other assets and non-operating income reduced by related expenses.**Based on the annual survey by Deloitte CIS.

in steel consumption from 1998 to 2015, second only to China. The construction industry is a major consumer of rolled metal products in ASEAN countries, accounting for 73.5 percent of the demand.

In 2015 steel output in Russia decreased by 1.5 percent to 69.4 million tonnes. In January-May 2016, the smelters produced 28.7 million tonnes of steel and 24.8 million tonnes of finished ferrous products, with an annual output down 2.4 percent and 2.2 percent, respectively.

In 2015 the demand for steel in Russia contracted by 10 percent to about 39 million tonnes. Specifically, the demand from the construction industry as the largest consumer of rolled products as well as from the car manufacturing industry dropped by 12 percent and 25 percent, respectively.

On the Russian market, decreasing demand resulted in rolled metal product imports dropping by 27.3 percent to account for 9.7 percent of the market.

Despite a decrease in demand, the smelting industry saw its net financial result* reach a historical high of RUB 572.4 billion in 2015, hitting an annual growth rate of 3.2 times. A weakening Russian rouble has boosted the competitiveness of Russian metal products, resulting in a sharp growth of exports and helping steel-makers offset losses caused by falling global prices.

Top-5** challenges facing steel-makers in 2016:

• Currency risk (40 percent)

• Shortcomings of government regulation of the industry (40 percent)

• Low foreign investment appeal (36 percent)

• Corruption (25 percent)

• Lack of qualified managing staff (25 percent)

Top-3** factors that could potentially drive development in steel-making companies:

• Lower labour costs (37 percent)

• Higher local demand in Russia (36 percent)

• Lower production costs (36 percent)

Top-5** priority growth strategies for steel-makers in 2016:

• Expansion into new markets (83 percent)

• More efficient production and technologies (77 percent)

• Business development through organic growth (73 percent)

• Higher prices for end products (67 percent)

• New product launches (67 percent)

Key findings


13


13


14

Top 20 steel producing companies in 2015 (million tonnes)

World crude steel production (million tonnes)

Countries where the Top 20 are located

Major steel producing countries in 2015 (million tonnes)

Top global steel producers

ArcelorMittal (USA)

Hesteel Group (China)

NSSMC (Japan)

POSCO (South Korea)

Baosteel Group (China)

Shagang Group (China)

Ansteel Group (China)

JFE Steel Corporation ( Japan)

Shougang Group (China)

Tata Steel Group (India)

Wuhan Steel Group (China)

Shandong Steel Group (China)

HYUNDAI Steel Company (South Korea)

Nucor Corporation (USA)

Maanshan Steel (China)

Thyssenkrupp AG (Germany)

Gerdau SA (Brazil)

Tianjin Bohai Steel (China)

Novolipetsk Steel (NLMK) (Russia)

Jianlong Group (China)

47.745

46.374

41.975

34.938

34.214

32.502

29.825

28.553

26.314

25.776

21.692

20.481

19.624

18.82

17.339

17.033

16.269

16.049

15.141

97.136

*USA, including ArcelorMittal

Russia, 3%B

razil, 33.3

Brazil, 3%

Germ

any, 42.7

Germ

any, 3%

South Korea, 69.7

India, 4%

Russia, 70.9

South Korea, 10%

United States, 78.8

China, 45%

China, 803.8

Japan, 13%

India, 89.4

Japan, 105.2

USA

*, 1

9%

Source: World Steel Association

1950

189

644850

1 343

1 239

1 4331 538 1 553

1 604 1 634 1 591

1975 2000 2008 2009 2010 2011 2012 2013 2014 2015


15

Top 4 steel producing companies in 2015 (million tonnes)

Industry outlook

Output of intermediate and finished products (million tonnes)

Company outlook

Arcelormittal’s total output is higher than the combined output of Russia’s top-5 steel producers

Top Russian steel producers

NLMK

EVRAZ

MMK

Severstal

14.35

12.24

11.45

16.05

48 50.5 49.9 51.5 53.7

66.8 70.4 68.9 70.5 69.4

5560 59.2 61.2 60.3

3.6 4.7 5.4 5.6 5.69.2 9.7 10.1 11.3 11.4

2010 2012 2013 2014 2015

Pig iron Steel Finished ferrous Flat-rolled coated products Steel tubes

Manufacturing sector

Steel-makers

Negative view Positive view

67% 33%

50% 50%

Manufacturing sector

Steel-makers

Negative view Positive view

93%7%

88%12%

Source: RSSS, World steel association, Deloitte Research Survey Results


16

Top-5 steel producing companies in 2015 (million tonnes)

Import and export of steel by region

Region EU Other European countries

CIS NAFTA Other American countries

Africa and the Middle East

China Japan Other Asian countries

Oceania Total imports

EU 106.4 5.5 14.5 0.4 2 1.4 8.5 0.3 4.9 0.1 144.1

Other European countries

10.3 0.7 8.8 0 1 0.1 3.2 0.4 1.3 0 25.8

CIS 1.3 0.4 8.7 0 0 0 1.6 0.1 0.3 0 12.5

NAFTA 7.3 2.5 3.1 17.4 6.4 0.6 4.4 4.3 9.1 0.4 55.5

Other American countries

1.4 1.1 0.6 1.3 2.9 0 8.4 1.4 1.3 0 18.3

Africa 7.3 3.2 6.8 0.2 0.4 1.6 9.2 1.3 1.4 0 31.3

Middle East 1.8 4.9 4.7 0.1 0.2 0 10.7 1.7 4.9 0.1 29.1

China 1.3 0.2 0 0.1 0.1 0 – 5.2 6.1 0 13.2

Japan 0.1 0 0 0 0 0 1.3 – 4.5 0 5.9

Other Asian countries

2.9 0.1 4.4 0.4 1.7 0.8 63.5 25.9 23 0.3 122.9

Oceania 0.2 0 0 0 0 0.1 0.8 0.2 2.2 0.3 3.8

Total exports 140.2 18.5 51.7 19.9 14.8 4.7 111.6 40.8 59 1.2 462.4

Including inter-regional exports

33.8 17.8 43 2.5 11.9 3.1 111.6 40.8 36 0.9 301.4

Net exports –3.9 –7.3 39.2 –35.6 –3.5 –55.7 98.4 34.9 –63.9 –2.6

Source: World Steel Association

IMPO

RTEXPORT


17

Top M&As* Target company

Industry Bidder company

Seller company Deal value (USD, mln)

Additional information

Gazprom (3.59% stake)

E&R Gazprom Vnesheconombank 1918.6 Gazprom PJSC has signed a definitive agreement to buy back its 3.59% stake shares from Vnesheconombank.

Rationale: The transaction will enhance VEB’s liquidity.

Background: Earlier in 2010, VEB acquired a 2.7% stake from E.ON AG.

Uralkali (20% stake)

Chemicals Dmitry Lobyak (private investor)

ONEXIM Group 1650.5 Dmitry Lobyak has acquired a 20% stake in Uralkali from Onexim Group.

Background: In December 2013, Onexim acquired a 21.75% stake in Uralkali for a consideration of USD 3.54 bln. Dmitry Lobyak is the CEO of Yuras-Oil LLC, the Belarusian-based wholesale supplier of chemical products.

Khrabrovo Airport; Mineralnye Vody International Airport (60% stake)

Transportation Novaport OOO OOO Aeroinvest 170.9 Novaport is 50% owned by AEON Corporation, which in turn is owned by Mr. Roman Trotsenko. Aeroinvest is part of Sindika Holding, owned by Mr. Arsen Kanokov.

Softline Group TMT Da Vinci Capital Management Ltd.

40 The transaction will enable Softline to expand its cloud and service businesses, diversify its product offerings and enter into new markets. In 2015 Softline generated revenues of USD 1,181 mln.

M2M Private Bank (75% stake)

FSI Asian-Pacific Bank OAO (ATB)

35.5 In October 2015, ATB had acquired a 25% stake in M2M for an undisclosed consideration. As of 1 August 2016, M2M had capital of approximately RUB 4.1 bln (USD 63.2 mln).

(Russian companies)

*Open information about deal value

Source: Merger Market


18

Source: Invest in Russia, Central bank of Russia, TASS

Global windTop news: China and Russia

23.09.2016Implementation of renminbi clearing bank in the Russian FederationThe People’s Bank of China (PBC) resolved today to authorise Bank ICBC ( JSC) (Moscow) to be the renminbi clearing bank in the Russian Federation. With this authorisation, the arrangements of the Memorandum of Understanding between the Bank of Russia and the PBC on the establishment of renminbi clearing arrangements in Russia, signed on 25 June 2016, have now been successfully implemented.

The establishment of Bank ICBC as the renminbi clearing bank is an important milestone in the cooperation between China and Russia aimed at strengthening links between the markets of the two countries. The availability of renminbi liquidity on the Russian market will facilitate renminbi transactions settlement continuity and promote the use of the renminbi in cross-border transactions between companies and financial institutions.

Furthermore, the development of a renminbi market in Russia will contribute to the standing of Russia as a regional financial hub for renminbi transactions in the Eurasian Economic Union.

02.09.2016Rosneft and Sinopec joint venture to design, construct and operate a facility in Eastern SiberiaRosneft and Sinopec are to draft their feasibility study on the project for the construction and operation of their gas processing and petrochemical facility in Eastern Siberia.

Where the actions are implemented successfully, the companies will establish their joint venture to design, construct and operate the facility. The annual capacity of the first stage will be 5 bln cu.m. of natural gas with an output of up to 3 mtpa of advanced polymers and petrochemical products to be sold mostly on the Russian and Chinese markets.

02.09.2016New oil production plant in the Amur RegionSirius Holding of China is constructing its oil production plant in the Amur Region. TASS was informed of this by Mr. Tao Jian, the Board of Directors President of Sirius Holding. “We have already started implementing the project. It provides for the production of oils used in food and cosmetics,” Mr. Tao Jian stated, “The investment volume is USD 1.44 bln.”

02.09.2016Chinese companies to invest USD 750 mln into soy production in RussiaChinese companies from Qinhuangdao (Hebei, northern China) intend to invest circa RMB 5 bln (USD 750 mln) into soy and other crops in the Russian Far East.

01.09.2016The Russian Direct Investment Fund will create a joint program with up to USD 500 mln of investments with China’s Inventis Investment HoldingsRDIF will create a new joint fund with a major private fund, Inventis Investment Holdings. It is the largest private fund of the Asian region. The relevant agreement was signed on 2 September at the Eastern Economic Forum. The joint fund will focus on the food and agriculture industries, as well as on the consumer sector, retail trade, processing, light industry, tourism and transportation. Investments of RDIF and Inventis into joint projects will be up to USD 500 mln.


19

Useful stickers

Russia for leaders: RBC 500 Companies to increase in revenues

Second Eastern Economic Forum 2016 wraps up with billions in deals and Japan in the spotlight

Innovate or die

Tech Days

Russia climbs two notches in the World Economic Forum’s Global Competitiveness Report 2016–2017, while Switzerland, Singapore and the United States remain the world’s three most competitive economies.

Recommended visit

Practical conference on corporate innovation, internal entrepreneurship and corporate venture funds18 November 2016Office Deloitte in Moscow, 2 floor

19.10.2016 Tech Days ENERGY16.11.2016 Tech Days GAMES12.12.2016 Tech Days MINING

ContactsJoe [email protected]

Marina ElovskayaSenior [email protected]

Lora ZemlyanskayaResearch Centre [email protected]

Vladimir SokolovResearch [email protected]

Artyom [email protected]

Tap on the QR-codes for more information

http://www.rbc.ru/economics/21/09/2016/57e2b1959a79478615a38289

http://tass.com/economy/897715

http://conf.disruptive.vc/

https://www.rvc.ru/eco/p3/investors_development_2016/84113/

https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1

mailto:jpacelli%40deloitte.ru?subject=Russia%20through%20a%20lens

mailto:melovskaya%40deloitte.ru?subject=Russia%20through%20a%20lens

mailto:lzemlyanskaya%40deloitte.ru?subject=Russia%20through%20a%20lens

mailto:vsokolov%40deloitte.ru?subject=Russia%20through%20a%20lens

mailto:abelyaev%40deloitte.ru?subject=Russia%20through%20a%20lens

deloitte.com

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. Please see www.deloitte.ru/en/about for a detailed description of the legal structure of Deloitte CIS.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 225,000 professionals are committed to becoming the standard of excellence.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

© 2016 ZAO Deloitte & Touche CIS. All rights reserved.

russia through a lens | 3q 2016

Documents