Russia's largest steelmaker, PJSC Novolipetsk Steel, plans to lower capital expenditure in 2020 and withdrew previous guidance of US$1.1 billion to US$1.2 billion, citing increased volatility in global markets triggered by coronavirus pandemic.

The start of certain expansion projects could be postponed, but the company known as NLMK will proceed with major overhauls at its flagship Lipetsk operation as scheduled for 2020, it said in a March 26 news release. One of the site's basic oxygen furnaces was upgraded in 2019 and work is due to commence on another in May.

"Over [the] five-year period until 2023 we planned to spend on average [US$400 million] per year on development projects according to our strategy," NLMK head of communications Maria Simonova told S&P Global Market Intelligence.

NLMK temporarily halted the bulk of its 450,000 tonne-per-annum Verona operations in Italy for at least two weeks as of March 26, Simonova confirmed. "We continue to look for the solutions for customers in critical sectors — e.g. customers supplying food, pharma and energy supply chains," she said.

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NLMK will provide guidance on second-quarter output with the April release of its financial results for the first quarter of 2020, Simonova said.

The steelmaker has sufficient liquidity to cover short-term debt maturities and keep business uninterrupted, with cash and cash equivalents and short-term liquid financial investments totaling US$1.6 billion and additional credit lines of about US$800 million, according to its statement. NLMK noted that its net debt had increased 5% from the end of 2019 to US$1.9 billion, with debt costs averaging 3.16%.

Europe is not a major contributor to the company's financial performance, so the closure is only a slight negative, BCS Global Markets' analysts wrote in a March 26 note.

The downside for the Russian steel industry from the downturn triggered by the coronavirus is unlikely to be high, BCS Global Markets wrote in a separate same-day note addressing the "COVID-19 induced recession."

The number of people with the virus recorded in Russia has been picking up and reached 840 cases as of March 26, according to the Russian government's official coronavirus website. The country's first two deaths were confirmed in Moscow on March 26 while President Vladimir Putin told the G20 summit that the outbreak would trigger more serious economic shocks than the 2008 to 2009 financial crisis, according to Interfax.

The Russian steel sector has the next-best story after gold, despite relatively strong potential downside for iron ore and steel prices of around 20% and 10%, respectively, in the coming weeks, according to BCS Global Markets' analysts. "The space has strong defensive characteristics against a possible upcoming recession, primarily due to its high reliance on China, which is now on its way out of the [coronavirus] arena after circa six weeks of heavy battle," they wrote.

BCS Global Markets prefers flat steel stocks such as NLMK, PAO Severstal and PJSC Magnitogorsk Iron & Steel Works, because as exporters the companies benefit from the devaluation of the ruble. The currency has tumbled against the U.S. dollar, losing 18.5% since the start of March, alongside the price of oil. The analysts also outlined a bear case for the sector in the next three to six months in a recessionary scenario, which would imply higher risk despite the ruble's depreciation and domestic steel price upside.

UBS Global expects new infection rates of coronavirus to peak around mid-April in Europe and the U.S. and the most severe restrictions to start lifting from mid-May and the economy recovering with a U-shaped curve taking hold in the last quarter of 2020.

NLMK's share price closed down 1.93% at 119.76 rubles apiece on March 26, while the ruble-denominated Moscow Exchange Russia Index finished the day 1.52% higher.

The steelmaker's profit plunged 61% year on year in the fourth quarter of 2019, resulting in a 40% slump in full-year earnings, as analysts warned of a challenging year ahead.

As of March 25, US$1 was equivalent to 78.91 Russian rubles.