Russia announces development strategy for its metallurgical sector up to 2015

Tuesday, 17 July 2007 16:30:17 (GMT+3)   |  
       

The Russian Federation's Ministry of Industry and Energy has announced its strategy for the development of the country's metallurgical industry during the period up to 2015.

The ministry points out that currently the metallurgical sector accounts for a five percent share in Russia's GDP, a 17.3 percent share in the country's industrial production, and a 14.2 percent share in the country's exports. In 2006 Russia was the fourth largest crude steel producer and third largest exporter of steel products in the world. However, regardless of the results achieved and the adaptation of the Russian metallurgical sector to the market conditions, its technical-technological levels and competitive ability can still be regarded as unsatisfactory, the ministry has concluded.

Therefore, the main aim of the ministry's strategy for the development of the Russian metallurgical sector till 2015 is the creation of favorable conditions for the development of the Russian economy based on the technological updating of the sector, aimed at increasing its economic efficiency, ecological safety, reducing the use of raw materials and therefore the production costs, as well as raising the competitiveness of produced goods  In addition, the strengthening of the position of Russian ferrous metal products in the CIS (including the Russian domestic market) and in the global market, is expected to be achieved.       

The strategy of the Russian Federation's Ministry of Industry and Energy proposes to solve several domestic problems in the Russian metallurgical industry.  First of all, the strategy foresees the creation of favorable conditions for the modernization and updating of the equipment to be used in the sector, thus increasing the competitiveness of manufactured products. For instance, the coefficient of technical modernization of metallurgical production capacities is currently less than two percent. The strategy foresees its increase to 3.5-four percent by 2010, and to 4.5-five percent by 2015. In addition, in Russia the use of raw material is higher by 7-10 percent than in Western Europe and the USA, the consumption of electricity is higher by 15-20 percent, while the use of labor is higher by two-2.5-fold. The strategy anticipates a decrease of these indexes by five-seven percent by 2010, and by 13-15 percent by 2015.    

In second place, the strategy is to implement measures for the reduction of the high import volumes of steel, which are supplied to Russia mainly at dumping prices. As a result of the strategy's implementation, Russia's volume of steel imports is expected to be reduced by 15 percent by 2010, and by 20 percent by 2015 - i.e. compared to the 2005 index. In particular, reductions in imports of pipes, of coated steel and of stainless steel are targeted.  

The success of the strategy depends on the solution of several structural problems. First of all, there is insufficient development of the metals processing industry. Currently, Russian products' competitiveness is based on low production costs (mainly because of low wages, cheap electricity and raw material). However, with time Russian metallurgists are losing this advantage. Secondly, the structure of the steel consuming sectors is inefficient and there is a low level of demand for high value added products in Russia, especially from the machine building industry. Due to the high level of imports of cars and equipment, the level of demand from this industry with high potential is very low. Russia's new strategy is aimed at  implementing the measures for the creation of favorable conditions for the development of the metallurgical and metal consuming sectors. As a result of the projected measures, the share of domestic consumption in domestic production is expected to rise from 51 percent in 2006 to 55 percent in 2010 and to 59 percent in 2015.  In addition, the share of high value added products in Russia's steel demand is expected to rise to 50.9 percent in 2010 and to 53 percent in 2015.

Regarding the problem of restricted access of Russian steel products to the external markets, the new strategy proposes an increase in the share of value added products and a change in the export-targeted countries.

At the same time, the strategy proposes to limit scrap exports from 13.5 million mt in 2005 to eight million in 2010 and to five million in 2015, so as to avoid a possible problem with domestic raw material supplies which might occur given the slowdown in collection levels.

Last but not least, the strategy understands the need for investments in the development of the Russian metallurgical sector. Although the main parts of the project are to be financed by the steel producers themselves, the strategy proposes the allocation of some financial means for the infrastructural aspects of metallurgical projects.

As a result of the implementation of the Minister of Industry and Energy's new strategy, Russian finished steel production is expected to rise to 66.6 million mt in 2010 and to 71.5 million mt in 2015; its coated steel production is to increase to four million mt in 2010 and 6.5 million mt in 2015; its production of pipes is to rise to 10.9 million mt in 2010 and to 12.5 million mt in 2015, while its iron ore production is expected to rise to 103 million in 2010 and to 104 million in 2015. In addition, the use of crude steel for the production of one metric ton of finished steel products is expected to decrease to 1.1 metric tons.


Similar articles

The Ukrainian scrap market in Jan-May 2008 - UAMB (Ukrainian Scrap Association) President V.A.Kulichenko and UAMB ...

25 Aug | Steel News

Ukrainian steel industry modernization picks up speed

30 Jul | Steel Matters

Rolmet discusses the key role of scrap in the steel market

29 Mar | Steel Matters

12th World Steel Conference

07 Mar | Steel News