The continually rising prices for
iron ore, the lessening of the
iron ore spot market, irregular shipments even on long-term contracts, as well as the growing proportion of
iron ore usage in steel
production against the background of a possible
scrap scarcity, all these factors have contributed to forcing the Russian domestic steelmakers to guarantee stable
iron ore supplies by acquiring their own
iron ore assets.
The consolidation of the steel industry in
Russia has led to a situation where the major
iron ore mines are under the control of the main steel enterprises. Geographically speaking, the main ore mines are located in the Central, North-West and Ural federal regions of
Russia, while Lebedinsky GOK, Mikhailovsky GOK, Stoilensky GOK, Kachkanovsk GOK and Karelian Pellet share between them the greater part of domestic
iron ore production. Currently all of these are owned by the main steel mills. Thus, Stoilensky GOK satisfies
NLMK's
iron ore needs, Karelian Pellet and Olenegorsk GOK supply
iron ore and pellets to
Severstal, while Korshunovsky GOK satisfies
Mechel's requirements. The largest
iron ore processors in
Russia, Mikhailovsky GOK and Lebedinsky GOK, which together mined approximately 100 million metric tons of
iron ore in 2006, both belong to the one of the largest steel holdings, i.e., to Metaloinvest Holding. Evraz Group also has its own
iron ore division – Evrazruda.
Until very recently
MMK was the only steel producer left without its own
iron ore assets. In the first half of 2006 the mill depended heavily on
iron ore imports from
Kazakhstan. This dependency made
MMK very vulnerable to any changes in the global
iron ore market. However, the situation changed once
MMK won the rights to develop the Prioskolskoye
iron ore deposit which holds large
iron ore reserves. According to estimates, the deposit can produce about 20 million metric tons of
iron ore a year.
Given the high growth rate of the Russian steel industry and the introduction of new capacities by the steelmakers, the possession of
iron ore assets seems to be one way out of the problem of raw materials shortages, especially as
scrap collection levels are dropping every year. Already, the increase in the use of
iron ore in steel
production is visible. For instance, in 2006
NLMK increased
iron ore consumption by 15 percent, while Evraz's ZapSib increased year on year
iron ore consumption almost by one third.