Fitch upgrades Severstal

Fitch Ratings said it upgraded PAO Severstal's long-term issuer default rating to BBB from BBB-.

The outlook is stable.

The upgrades reflect Severstal's tested conservative financial policy during the supply driven steel price turbulence in 2016 to 2017 and increasing protectionism since 2018, Fitch said.

Its strong financial profile has been driven by very low steel-making costs underpinned by its integration in iron ore and coal, focus on high-value added products with over a 45% share in sales and modest capital expenditure, the agency said.

This has allowed Severstal to repay about $1 billion over the last three years and achieve one of the lowest leverage levels in the industry, Fitch said.

The agency said it expects Severstal to maintain its conservative financial profile despite a conservative outlook for steel prices and temporarily elevated dividends driving negative free cash flow until 2021.

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