June 28, 2010 / 5:14 PM / in 10 years

Russian steelmakers see US demand supporting prices

* Severstal owner says US steel use has been abnormallly low

* Sees widespread output cuts in Europe in third quarter

MOSCOW, June 28 (Reuters) - Russian steelmakers expect U.S. steel demand to support prices for the rest of the year despite recent weakness in China and a soft Eurozone economy, the top two Russian producers said on Monday.

Alexei Mordashov, owner of Russia’s largest steelmaker, Severstal (CHMF.MM), operator of several plants in the United States, said U.S. consumption had been abnormallly low at just half China’s level.

“It is hard to imagine it could remain like that,” Mordashov told reporters on the sidelines of an investor conference held by Renaissance Capital.

Severstal has said it would idle primary steelmaking at its high cost Sparrows Point, Marlyland, plant to compensate for weak demand. [ID:nLDE6570JY]

Output cuts will be widespread in Europe during the third quarter as restocking slows and doubts persist about the sustainability of Chinese demand after a sharp increase in the early months of the year.

Russia’s second largest steelmaker, Evraz HK1q.L, is seeing healthy demand in the United States for infrastructure projects while growth in Europe remains sluggish, its vice president for international business development, Timur Yanbukhtin, said.

“The basic trend is moderately positive, although volatility remains high,” Yanbukhtin told reporters.

“The trend toward growth is largely down to increased prices for raw materials. We do not see any fundamental reason for steel prices to decline,” he added.

Metalloinvest, which controls much of Russia’s iron ore industry, said it expected prices for the raw material to rebound in the fourth quarter following a dip in prices as Chinese mills cut production and pricing became more fluid.

“The third quarter should be weaker than the second because of the correction in steel prices,” Metalloinvest chief executive Eduard Potapov said.

“From the fourth quarter onward there are preconditions for steel, iron ore and coal prices to resume their rise.” (Reporting by Polina Devitt; writing by Melissa Akin; editing by James Jukwey)

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