Russia's only steel producer in Far East region, Amurmetall, has announced its decision to layoff 1,649 workers, i.e. about 25 percent of its staff, by September 2009, in an attempt to optimize the plant's production.
Due to low prices and lack of demand for steel products, up to the end of 2009 Amurmetall will continue to suspend operations at its flat rolling shop, roll-formed section shop and at its first machine-shop, and may halt its rolling mill shop. In the first quarter of 2009, Amurmetall was operating at 60 percent capacity, but in May the plant reduced its capacity to 25 percent due to a serious shortage of scrap.
Currently, Amurmetall is registering monthly losses of about Ruble 180 million (approx $5.6 million) from its operations, and in such conditions is not able to secure loans from banks. In addition, Amurmetall's overall debt stands at Ruble 16.4 billion (about $519.2 million) after it took out loans to upgrade the plant over the past two years. About Ruble 11 billion (about $342 million) of the debt is due this year.
According to Amurmetall CEO Sergei Khokhlov, the plant is currently holding negotiations with Gazprombank, Commerzbank and Erste Bank to obtain new loans. With state guarantees promised by Russian Prime Minister Vladimir Putin, the company expects to secure a Ruble 3.3 billion (approx. $102.7 million) loan from Sberbank.
Amurmetall requires Ruble 1.5 billion (approx. $46.7 million) to replenish its working capital and Ruble 1.8 billion (approx. $56 million) to finalize its investment program. After it secures the loan, the company plans to increase its production capacity to 90 percent by September 2009, since, according to Mr. Khokhlov, the plant has guaranteed demand from traders First Alpina and Stemcor.
Amurmetall has a production capacity of 2.1 million mt of steel, and, currently, due to the low demand in the Russian domestic market, is exporting about 80 percent of its products mainly to South Korea, Vietnam and Indonesia.