According to a statement by ArcelorMittal Kryvyi Rih, it will invest $400 million in modernization from 2017 to 2020. We also know that the company’s investments within the scope of its modernization program amounted to approximately $233.55 million last year. What details can you give regarding your investments?
ArcelorMittal, which is the biggest foreign investor in Ukraine, aims to develop its business in the country and transform ArcelorMittal Kryvyi Rih into a technologically-renewed modern plant by 2020. Our strategy of developing a modern competitive company assumes the raising of the performance of ArcelorMittal Kryvyi Rih to European levels of energy consumption, efficiency and environment-friendly performance.
ArcelorMittal Group remains committed to modernizing its operations and the company achieves this in terms of ongoing augmentations in the production process. In 2017, the company plans to invest in the range of $400 million, in capital and operational investments. The key ongoing investment projects are construction of coke oven batteries Nos. 5-6, construction of the new LF-CC-2, reconstruction of the GCP in sinter plant-2 and the BOF shops, modernization of LSM-4, repair of the blast furnaces and repair of the THF.
The company’s 2016 results were positive despite strong challenges. Could you comment on your results?
In 2016, we achieved our highest level of crude steel production since 2008 and achieved our target of 7 million metric tons in Ukraine, and the biggest contributor to this was the stability of our operations. There was a challenge from the world market but we were up to it and faced it with great aplomb. Last year, we sold 87 percent of our finished products in the export markets and 13 percent in the domestic market. The long steel export markets are still facing challenges in the first quarter. Dumping from Chinese mills, the devaluation of national currencies in Turkey and Egypt, low demand, military activity, and the duty barriers in several countries have put pressure on our sales. Different markets have different challenges; despite this, the performance of our sales team has been great and has given us the desired sales in these markets.
ArcelorMittal Kryvyi Rih is the first steel company to implement its own environmental monitoring system in Ukraine. As environmental policies in steelmaking become much more important in Europe, how do you evaluate the company’s approach to environmental issues?
The key tasks of the current stage of the investment program of ArcelorMittal Kryvyi Rih are to increase the production rate, to replace obsolete equipment with environment-friendly equipment, and to improve the environment in Kryvyi Rih and in the whole region.
In 2016, ArcelorMittal Kryvyi Rih invested UAH 417.7 million in environmental projects. Steel production is linked with the significant environmental footprint that it leaves behind. Each investment project of the company adheres to the environmental aim to reduce emissions as much as possible. The main goals of ArcelorMittal Kryvyi Rih in the ecological area are to fulfil its environmental obligations and to implement ecological safety activities. According to these goals, the company improves its environmental management system, renovates environmental facilities, and develops new methods of waste processing, storage and management. ArcelorMittal Kryvyi Rih is one of the first steel plants in Ukraine to have adopted an environmental management system for the efficient management of environmental issues. Every year, the plant proves that its environmental management system meets the requirements of the international standard ISO 14001:2004, which testifies to the high reliability and productivity of the environmental management system.
The company has completed its 11th year in Ukraine. As the challenges seem to be more numerous now considering the complicated situation in Ukraine and global effects such as the rise of coke and coal prices, how do you view the company’s current operations in Ukraine and what can we expect in the future?
We are proud of the fact that, despite numerous challenges during these 11 years of our presence here in Ukraine, we have continued our investments here. ArcelorMittal is the world’s number one steel producer and the biggest foreign investor in Ukraine. During this difficult period for the world’s metallurgical industry and for this country, ArcelorMittal’s interest in Ukraine has remained unaltered we keep on investing in our operations, ecology and modernization in order to maintain the sustainable development of our business, our employees and the local community.
At present, ArcelorMittal Kryvyi Rih is implementing its investment program 2020, which is directed at the modernization of production with investments of US$1.2-1.5 billion. Even during this tough time - with issues including financial instability, the narrowing of the domestic market and the collapse of external market - ArcelorMittal has not left this country and remains committed to the development of Kryvyi Rih and Ukraine in general. Unrest in the eastern region of Ukraine has hampered the supply of raw materials including coal, coke and limestone, and the plant has had to turn to imported raw materials. We have worked with alternate sources and suppliers, mainly for imports, and have mitigated the impact on our operations at the price of increasing the production cost.
By continuing its operations in Ukraine, ArcelorMittal show responsibility for the fulfilment of its commitments: it confirms its faith in the future prosperity and success of Ukraine. We still expect more actions to be taken by the government of Ukraine to improve the business environment for new foreign investors to come to the country, and to create favourable conditions for those foreign investors who are already working in Ukraine.
In just over 10 years of operations in Ukraine, ArcelorMittal has invested US$10.4 billion in its Kryvyi Rih unit, including the cost of privatization. The company confirms its intentions to continue investing and contributing to the development of Ukraine.
Protectionist measures are seen to be increasing globally. For example, recently Egypt started antidumping and countervailing duty investigations for wire rod and rebar imports from Ukraine and Turkey. How do you think producers will be affected by these measures? While steel prices continue to remain low, would you say that target markets could change drastically in the future for long steel producers in Ukraine and/or Turkey?
Nowadays, many countries have implemented import duties for long products with the purpose of protecting their domestic markets. The main reason for this is the overcapacity in the world. There is no balance between production and consumption. A large number of producers are going forward with a strategy to maximize volume and install new capacities. Such a strategy needs first to make sure that demand exists for sales. Unfortunately, this is not the reality of today and that is why we can see the unbalance in the market.
AMKR is always stable with its sales volumes. We are present in many countries without aiming to dump in or destroy any markets. We are open to collaboration with authorities in different countries, including Egypt, and to providing the necessary information for full investigation. Our main target is to produce and deliver high quality products with a high level of services to our customers around the world and we will continue to follow this strategy.
How do you evaluate demand for your products in your domestic market?
Demand is expected to be stable in Ukraine. AMKR may take a stronger position in the domestic market due to the growing unrest in the eastern region, which might lead to shrinkage of some capacities. Due to these factors, AMKR has the opportunity to become the primary source of supply.
We are developing our own distribution channel through warehouse sales. Today we have a total of seven warehouses in operation in different regions of Ukraine and we are going to open two more in 2017. This will help us to have a better understanding of the market’s needs, to be closer to our customers and to provide an effective logistic service.
We constantly work on improving quality, developing new products and implementing the individual approach to meet the customer’s needs.
What are the main issues or aims on ArcelorMittal Kryvyi Rih’s agenda?
The main aims are:
- Ensuring safe, socially aware, environmental friendly performing business
- Sustainable development of products, quality, processes and people
- Investing in new CAPEX and OPEX projects
- Generation of more value for stakeholders
Any final comments?
ArcelorMittal is the global leader in steel production and the values it espouses will remain intact at their unit in Ukraine as well. AMKR will continue investments to improve its production processes and to produce world-class steel for Ukraine and other markets.
Despite all the difficulties related to the market situation in the past, we believe that the situation will change in 2017 for long product markets. There is a positive forecast for macroeconomic indicators around the world, which will lead to an increase in demand and prices.
Everything has its own cycle. The market will always have its challenges, its ups and downs, the availability of demand or the lack of it. However, steel is a product that connects the past and future, being present in all aspects of modern life. This means demand for steel will always exist in the world. AMKR, as a steel producer with a full cycle of production from ore to rolling, can guarantee 100 percent of the best quality and reliability to our customers.