The Russian steelmaker Novolipetsk Steel (NLMK) is considering the acquisition of one or several coking coal producers in order to achieve self-sufficiency in raw materials, NLMK's head of investor relations Mr. Anton Bazulev has stated.
NLMK's annual coal consumption is currently estimated at 9-10 million mt, while in Russia the company plans by 2014 to increase its steel output capacity from the current 12 million mt to 17 million mt per year, i.e. by 40 percent.
NLMK's main focus for growth will be the long product division at its steel producing subsidiary Maxi-Group, the capacities of which are planned to be increased to up to four million mt of steel per year. In addition, NLMK intends to increase its flat steel product output at its main production site in Lipetsk by 500,000 mt, and, as SteelOrbis previously reported, the company is also constructing a new 3.4 million mt capacity blast furnace (BF) which is scheduled to be commissioned in late 2012.
Currently, NLMK does not possess its own assets for the supply of coal concentrate, and, in the event of new price increases for raw materials, this situation would negatively affect the company, market analysts state. As SteelOrbis previously reported, since the beginning of October this year, coking coal producers in Russia have started to increase their prices. The Russian coal mining company Belon Group (Belon), currently owned by MMK, was the first domestic company to announce an increase in its coking coal price, up 62 percent to Ruble 3,000 (about $104) compared to the price level of the first half of the year. According to the analysts, due to the rise of coal prices, the increase in production costs of steelmakers without their own raw material units, would amount to eight percent.
Accordingly, NLMK is considering buying assets in Russia or Ukraine, as during the crisis the value of coal companies has declined.
NLMK owns a coal asset in Russia's Kemerovo region, namely, the Zhernovskaya-1 coal mine, with a capacity of three million mt of coking coal per year; however, its development is planned for 2010 and the mine will take three or four years to build and is expected to achieve full capacity in 2016. NLMK is also to construct a coal enrichment plant at the site, as it needs coal concentrate.