Memo from Moscow
Steel News from Russia, Ukraine and other CIS States
Steel Modernisation Projects in Russia, July 2009
The current development programme for the Russian steel sector calls for capital investment at the level of ~US $30-55 per tonne of crude steel output per annum to the year 2015. Whilst this plan may have been put to one side in recent months, at end-2008 the Russian Government reiterated its support for several large steel industry projects. These included the Mill 5000 plate mill projects of MMK in Magnitogorsk and of OMK in Vyksa (for both of which, equipment is being supplied by the SMS Demag Group); the Rail and Structural steel mill at Mechel; a few large diameter pipe mill projects; and DRI/HBI Midrex plant modernisation at Lebedinsk.
Russia has a very attractive pipe market, particularly for the oil and gas sector. The total length of gas and oil pipelines is about 220,000 km, and these use pipes of 1020-1420 mm diameter. Russia would most certainly welcome investments geared to modernisation of its oil/gas trunk pipeline network, as much of this network is in need of replacement. Some new large and trans-national projects planned by Gazprom and Transneft will need also millions of tonnes of 1420 mm pipe.
There are three major tube and pipe Holding companies in Russia today. These are the Pipe Metallurgical Company (TMK), the United Metallurgical Company (UMC) and the ChTPZ Group. Recently these firms have invested as follows
- The Vyksa Steel Plant (UMC) saw modernization of a forming/1420mm welding pipe manufacturing line in cooperation with Germany’s SMS Meer;
- The Izhora pipe mill (in Kolpino, near St. Petersburg) of Severstal Group - current owners of the only Russian Mill 5000 heavy plate mill - invested in production capacity for high strength steel [up to X100] suitable for straight-seam welded pipe in 18 metre lengths;
- The Volzhky Pipe Plant of TMK just a few months ago put on the stream a new 650,000 tpy straight welding pipes line which will increase large diameter pipe (LDP) capacity to approximately 1.2m tpy. The mill will produces pipes of up to X100 grade with a diameter of 530-1420 mm;
- The ChTPZ Group in 2008 began building in Chelyabinsk a new longitudinal welding pipe line supplied by SMS-Meer for manufacture of LDP from plates supplied by MMK's new Mill 5000 facility. The new mill comprises two production lines for 18 m and 12 m length pipes with wall thickness of up to 48 mm. Total investment in the project equal $ 600m. Annual capacity will total 600,000 tonnes of pipe, and the mill will be put into operation at end-2009.
- MMK will this month put on-stream its new Plate Mill 5000 facility, and at UMC plans continue for construction of Russia's third Plate Mill 5000 at Vyksa. MMK and Gazprom in 2007 signed co-operation agreement to 2015 covering supply of LDP after construction of MMK's Mill 5000 based on large diameter pipe production at ChTPZ's Chelyabinsk pipe plant. This LDP will mainly be used for gas lines in Siberia and in the Russian Far East regions. Mill 5000 at MMK with a capacity 1.5m tpy will produce high quality plate of strength class Х100-Х120 with widths of up to 4,850mm. MMK's new complex will include a slab casting machine with 1.65m tpy capacity and secondary metallurgy units (also supplied by SMS Demag). In July 2009 MMK also puts into operation a second line for polymeric coating with capacity at 200,000 tpy.
- In 2007, UMC at Vyksa started to implement a new Plate Mill 5000 project. Investment in this project may exceed US $2 billion, and mill start-up is expected in 2010.
A number of steel modernisation projects unrelated to LDP are also underway. These include:
- ChTPZ Group continues with its project for construction of a new EAF shop at the Pervouralsk Tube Works.
- At MMK, the modernization of the cold rolling complex with start-up of a new Rolling Mill 2000 and start-up of a new hot dip galvanizing line is underway.
- A new EAF at Seversky Tube Works supplied by SMS Demag is planned as the final step in creation of a modern complex with steelmaking capacity of ~1m tpy. TMK's strategic plan includes construction of continuous casting machines at the Seversky, Tagmet and TMK-Resita plants, and at the piercing mill at Seversky.
- At Vyksa, OMK in 2008 put into operation a new and unique Casting and Rolling Complex supplied by Danieli. The initial capacity of CRC is ~1.5m tpy of strip. The amount of investment in the first phase was $1.4 billion. The second phase - which will add around 1.5m tpy of capacity - will cost a further ~$600m.
- Mechel Group in collaboration with Danieli of Italy and Minmetals from China is constructing a new rail and structural steel mill with investment of ~$500m at Chelyabinsk. Adoption of a unique technology to produce high quality rails that conform to the most stringent requirements set by Russian Railways (RZhD) will ensure that output from this mill attains the highest quality standards.
- Urals Steel of Metalloinvest Holding has also just upgraded its EAF shop with continuous casting and Rolling Mill 2800, for production of strip and tube billets for supply to the ChTPZ pipe plant. There is also a plan to build a new BOF shop.
- The large steel Holdings such as MMK, Severstal, NLMK and Mechel also continue with other development projects. NLMK for example continues to implement the Second Phase of the Technical Upgrading Program (2007-2011). The strategic goals of this program are to increase crude steel production by 40% to 12.4m tpy at Lipetsk site; to increase the production of finished flat steel products by 90% to at least 9.5m tpy both at Russian and overseas facilities.
Together with the good progress noted above, so the steel sector is also seeing some adverse changes - with some medium steel plants heading towards real cash flow difficulties in 2009. For example, the metallurgical work STAKS (Red Sulin of Rostov region) of MAIR Group completely stopped production in May 2009. This plant has been under modernization since 2007 with increases in crude steelmaking capacity to 1 million tpy, the contruction of a new 500,000 tonnes / year long product facility and much recent capital investment. The almost-closed special steel producer Zlatoust Metallurgical Works of ESTAR Group is also reportedly in difficulties, as are some production shops of Amurmetal in the Russian Far East.
| 01-Jun-09 | Kazakhstan steel industry review |
| 01-May-09 | Demand collapse |
| 01-Apr-09 | Russian steel crisis - raw materials |
| 01-Mar-09 | Ukraine steelmaking raw materials |
| 01-Feb-09 | 2008 year end review |
| 01-Jan-09 | Impact of the credit crisis |
| 01-Dec-08 | Consolidation |
| 01-Nov-08 | Investment activity |
| 01-Oct-08 | Stainless steel sector in Russia |
| 01-Sep-08 | 2007 Russian steel industry review |
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