Russia Wins 2018 Soccer World Cup Host Bid And Stock Market Surges

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Much to England’s outraged indignation, the international football association FIFA awarded the 2018 Soccer World Cup to Russia. Even after fielding the British Prime Minister David Cameron at his suave best, the No. 2 in line to the throne, Prince William, and that icon of the soccer field David Beckham, FIFA still had the temerity to turn down what everyone agreed was the strongest and most sophisticated bid. British officials fumed at the decision, pointing out that England is so well endowed with world-class soccer venues that it could host a World Cup tomorrow.

But whatever the rights or wrongs of FIFA’s opaque and shady dealings, that last point is of more interest to us soccer fans that are also metal fans, because it is reported in a Bloomberg article that Russia has had commit to the construction of 13 new stadiums and the renovation of three more at a projected cost of $3.8 billion, and an operating budget of $641 million for 2017-2018. Russia has also pledged to make “major upgrades and capacity increases at most airports serving the 13 proposed host cities. Having attended domestic soccer games in Russia, I can only say $3.8 billion sounds cheap — most Russian stadiums are in an appalling state of repair and could do with being torn down and rebuilt from the ground up. “We have a lot do to — stadiums, airports, roads, Russian Prime Minister Vladimir Putin is reported as saying. “But this presents us with a challenge ¦ it means the development of roads and transportation infrastructure for our country.

Russian steel companies bounced on the Moscow Micex stock exchange, Severstal was up nearly 8 percent, Novolipetsk jumped 5.1 percent and Magnitogorsk Iron & Steel 3.8 percent on the bid news. Domestic steel prices are expected to rise to a significant premium to export prices following a trend that has already started this year for non-ferrous metals like aluminum where domestic producers have cut export volumes attracted by premium-priced, booming domestic demand.

Brazil has both the World Cup of 2014 and the Olympics in 2016, ensuring a heavy demand on infrastructure spending which should result in support for domestic metals producers. A Businessweek article estimates the two events will help support up to 274 billion reals (US$ 162 billion) in infrastructure spending through 2013 as the government pledged to build roads, ports, railways and power plants to meet the country’s future demand.

South Africa was the last to host a World cup and they reported that 480,000 overseas visitors spent US $1.35 billion during the games, according to estimates in TimesOnline, and Europe was said to have gained a £13 billion ($20 billion) boost from the 2006 World Cup. Maybe the Russian stock markets’ enthusiasm has one eye on an ABN Amro report that the average stock market gain for the winning nation averaged over the span of three World Cups was 10 percent – on the flip side the bank calculates that the average stock market loss for the losing finalist averaged over the same time span was 25 percent.

So whatever alleged bribes Russia paid for the decision to go their way, it was probably money well spent. In the long run, football stadiums (unlike Olympic Games stadiums) tend to get used week-in, week-out for years to come, justifying their construction costs, along with those of enhanced or new airports, railways and highways. Russia has a legacy of neglected infrastructure that the World Cup investments may go some small way towards resolving. I am sure I speak on behalf of all teeth-grinding Brits when I wish them well — I have no doubt it will be a thrilling World Cup tournament.

–Stuart Burns

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