The Russian metallurgical market is part of the world economy. The global economic crisis dramatically diminished the metals market. Solvent demand for metal products plummeted both domestically and in foreign markets. Like their foreign counterparts, Russian metallurgical plants had to cut production.
In 2009 Russia's mining and metallurgical enterprises produced:
-92 million tonnes of market iron ore, or 91.9% of 2008;
-27.4 million tonnes of coking coal, or 85.5%;
-43.9 million tonnes of cast iron, or 91%;
-59.2 million tonnes of steel, or 86.1%;
-50.8 million tonnes of rolled ferrous metal stock, or 89.7%;
-6.7 million tonnes of steel piping, or 85.6% of the 2008 level.
The Russian steel industry has been modernized significantly in the last decade. Total investments from 2000-2010 amounted to 900 billion roubles. During this period basic asset depreciation dropped from 54% to 43%. The implementation of large-scale investment projects and measures to boost production efficiency elevated the industry to a new level: new technology was introduced, inefficient capacity was shut down and the percent of added value in the final product increased. All this enables Russian metallurgical companies to compete openly and successfully on world markets, making Russia one of the global leaders in the sector.
The domestic market has always been and remains the priority market for Russian metallurgical companies. For example, export of finished rolled steel was 15.1 million tonnes in 2000 and 12.9 million tonnes in 2007 while the percent of domestic deliveries of finished products (not taking into account semi-finished products) in total output increased respectively from 67.7% to 78.3%.
All the investment projects implemented or being implemented under the Strategy of the Development of the Metallurgical Industry in Russia until 2020 are aimed primarily at meeting the demand of domestic consumers as set down in the development strategies of the corresponding sectors of the economy such as the fuel and energy sector, shipbuilding, aircraft building, the defence industry, transport machine-building, energy, railway transport, construction, etc.
For 2009, in spite of the crisis, Russia moved from fourth place (68.5 million tonnes) to third place (with 59.2 million tonnes) as a steel producer even though its world market penetration dropped from 6% to 5%.
One highlight of the crisis is that Russian steelmakers have managed not only to maintain exports, but to improve them by cutting back on semi-processed product, which attests to their competitiveness in the world market.
At the end of 2009, the share of blanks in rolled stock export was less than 50% while the share of rolled section steel increased to 16%, or by 297,000 tonnes, in the 4th quarter of 2009 (from 853,000 to 1,150,000 tonnes), compared with the fourth quarter of 2008.
Indicators from the first five months of this year show that the Russian metallurgical industry is making a confident recovery from the crisis. All the metallurgical enterprises reported increased production in 2010. Steel mills and pipe plants are loading their production capacity, restarting the previously idle units and projects to modernize equipment and build new production facilities.
In January-May 2010 the mining and metallurgical plants in Russia produced, compared with the same period of 2009,
-marketable iron ore: 38.2 million tonnes, or 120.8% (May to April 2010, 104.6%);
-metallurgical coking coal: 11.5 million tonnes, or 128.6% (May on April, 2010, 100%);
-cast iron: 20.4 million tonnes, or 127.2% (May on April, 2010, 96.9%);
-steel: 27.2 million tonnes, or 125.0% (May on April, 2010, 104.0%);
-finished rolled steel: 23.4 million tonnes, or 123.0% (May on April, 2010, 104.0%).
In the first 5 months of 2010, 3.5 million tonnes of steel piping was produced, or 146.8% compared with the same period of 2009 (May on April, 2010, 92.2%).
During the crisis, government support measures in metallurgy were aimed at preserving and expanding the positions of metallurgical enterprises in world markets, at protecting domestic producers in the home market and stimulating internal demand for metal products.
As part of the anti-crisis measures and in support of Russian producers in the domestic market, customs tariff regulations on the import of certain types of mining and metallurgical product were amended as follows for the second half of 2009:
-import customs duties on certain types of rolled stock were raised;
-import customs duties on certain types of flat, cold-rolled stock were raised;
-import duties on magnesium waste and scrap have been approved;
-zero import customs duties on ferrous metal waste and scrap have been extended for a further 9 months.
By decision of the EurAsEC Interstate Council No.18 of November 27, 2009 the Single Customs Tariff (SCT) of the Customs Union of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation was approved. SCT, which came into force on January 1, 2010, was the result of a compromise, mutual accommodation of partners' interests for the sake of a common goal: expanding mutual cooperation by establishing a uniform tariff barrier for third-country goods.
Based on the results of studies carried out by the Ministry of Industry and Trade of Russia, non-tariff measures were taken to protect the metallurgical industry:
-a special duty rate of 28.1% of the customs value was set on stainless steel pipes;
- an anti-dumping duty offset at 19.4% was introduced for roller-bearing pipes from China imported into the customs territory of the Russian Federation;
-a special duty of 21.8% on fasteners in the machine-building industry was introduced;
-the Agreement between the Ministry of Economic Development of the Russian Federation and the Ukrainian Ministry of Economy and European Integration regulating supplies of certain types of steel pipes originating from Ukraine to the customs territory of the Russian Federation that set the volume of supplies at 260,000 tonnes in 2010 has been extended through December 31, 2010.
To stimulate innovative development of the industry and prevent the widening of the technological gap, investment project implementation support was rendered to those aimed at import replacement, resource and energy saving, upgrading of the quality and competitiveness of metal products and improvement of the environment.
Thus, the Russian government approved a list of technological equipment whose analogues are not produced in Russia for exemption from VAT when imported. The duties on the technological equipment which have no analogue in Russia have been set at zero (the government resolution includes 91 items of equipment, including five for the mining industry and seven for the metallurgical industry).
In 2009, mining and metallurgical enterprises completed several major priority investment projects:
-Rolling Mill-2800 for hot rolling of thick sheet and the Continuous Casting Machine were launched at the joint stock company Urals Steel (part of Metalloinvest Ltd.). The total investment is about 15.5 billion roubles;
-In July 2009, a complex for the production of thick rolled sheet, including Rolling Mill 5000, was introduced at the Magnitogorsk Metallurgical Plant at the total cost of about 52 billion roubles;
-In October 2009, the Novolipetsk Metallurgical Plant introduced the fourth continuous hot zinc plating unit with a capacity of 300,000 tonnes a year, which will increase the range of products by adding thinner zinc-plated rolled stock (up to 0.22 mm). The total investment under the retrofitting programme implemented jointly with Andritz Sundwig (Germany) exceeded 2.5 billion roubles.
The interagency commission reviewed the financial and economic status of 12 mining and metallurgical companies. In effect state guarantees on loans intended to finance core production activities and capital investment were granted to the following ferrous metallurgy enterprises, a total of 53.4 billion roubles:
1. Metalloinvest Ltd (including open joint stock company Lebedinsky Ore Dressing Plant, Mikhailovsky Ore-Dressing Plant, Urals Steel open joint stock company and OEMK) in the amount of 30.75 billion roubles as security for a 61.5 billion roubles loan;
2. The Chelyabinsk Pipe Rolling Plant Group (including open joint stock company Pervouralsk New Pipe Plant and open joint stock company Chelyabinsk Pipe Rolling Plant) in the amount of 10 billion roubles to secure a 20 billion rouble loan;
3. Open joint stock company Pipe Metallurgical Company (including Seversky Pipe Plant, Sinarsky Pipe Plant, Volga Pipe Plant and Taganrog Metallurgical Plant) in the amount of 7.5 billion roubles to secure a 15.0 billion rouble loan;
4. Open joint stock company Koks (part of Mechel) in the amount of 2.0 billion roubles to secure a 4.0 billion rouble loan;
5. Open joint stock company Tula Chermet (part of Industrial-Metallurgical Holding Ltd.) in the amount of 1.5 billion roubles to secure a 3.0 billion rouble loan;
6. The Lipetsk Metallurgical Plant Svobodny Sokol in the amount of 1.65 billion roubles to secure a 3.3 billion rouble loan.
Pursuant to the Russian Government's resolution, federal ministries are responsible for overseeing the targeted use of the state guaranteed loans.