In the framework of the strategic development program for its assets, the Ukrainian group Metinvest Holding is currently implementing a number of investment projects. In 2007 these projects were mainly directed at ensuring the group's profitability, at increasing its product quality and competitive ability, along with ensuring significant environmental advances.
Cost-saving technologies
With prices of raw material and other natural resources used in steel production growing every year worldwide, many steelmakers are struggling to keep their production costs under control in order to keep their products' competitive in the international market and to ensure profitability. The increase in raw material and energy costs in recent years has also affected Ukrainian steelmakers and forced them to search for more efficient ways of using raw materials and energy resources so as to keep their primary production costs under control. By implementing new investment projects directed at the introduction of new energy- and raw material-saving technologies, the Ukrainian steel producers are able to reduce their dependency on Russian natural gas supplies (the prices for which are reviewed upward every year), be less effective by the growing costs of other energy resources, and to reduce their dependency on developments in the uncertain raw material markets.
With the aim of cutting production costs, Metinvest has implemented a number of projects focusing on its production assets. Thus, in September of the current year, Metinvest has completed the installation and begun operating a new blast-furnace gas pipeline Domna-TEC at its steel producing subsidiary Azovstal. The new pipeline allows the mill to increase the use of blast-furnace gas and thereby to reduce its consumption and use of natural gas. In half a year alone, the mill will be able to save about 19.440 million m3 of natural gas. Meanwhile the yearly savings on natural gas consumption are estimated at more than UAH 50 million ($9.9 million).
In addition, in November of 2007, Metinvest began to use an infrared camera at its blast furnace No.6 which allows visual control of charge levels and gas flows in the BF. The installation of the camera will enable to increase use of gas inflows due to the controlled distribution of raw materials and energy resources consumption in the BF and therefore will lead to the reduction of metallurgical coke consumption. In addition, the new equipment enables the mill to reduce the time spent revamping the BF and therefore to increase the furnace's time of service.
Another example of energy-saving technologies is found in the installation and start-up of a new air separation unit VRU-60 at Azovstal. The unit has not only solved a problem of oxygen shortage at Azovstal, but also allows the mill to reduce its energy consumption. With the installation of the new equipment, which is a low-energy consuming unit, Azovstal expects to save about UAH 28.3 million a year on energy consumption.
In 2007, Metinvest implemented the reconstruction of the second line of benzol scrubbers in the benzol entrapping division of AKHZ, Metinvest's coke producing subsidiary. The reconstruction works are implemented in the framework of the full reconstruction of the division in question and are directed at increasing benzol quality, reducing material losses during the production process, and also at reducing exploitation costs and use of energy resources while improving ecological effects.
Production capacity expansions and quality improvement projects
Along with costs-saving technologies, Metinvest has introduced new capacity expansion and modernization projects at its facilities.
For instance, in July of the current year, another Metinvest steel producing subsidiary EMZ commenced a new blast furnace No.5 with annual production capacity of 1.05 million mt of pig iron. The commencement of the new BF will allow the increase of EMZ's steel production capacities to 3.5 million metric tons a year.
Furthermore, the construction of a new air separation unit VRU-60 at Azovstal is also considered to be one of the steps in reaching the mill's goal - i.e. production of eight million metric tons of high quality steel per year.
In addition, during the current year, Metinvest completed the installation of two new mills for welding of inner weld seams on pipes of large diameter at its pipe producer KhPW. The mills are equipped with a modern system of tracking loop and the Z5 "Uhrhan&Schwill" program complex which provides automatic control of the whole welding process for supporting standard conditions of welding with the possibility of documenting actual work parameters. Although the project does not entail any direct capacity expansion, it enables the mill to improve the quality of the pipes produced.
Meanwhile, a number of projects also implemented at Metinvest iron ore subsidiaries Seversky GOK and Central GOK aimed at the expansion of their capacities and the modernization of production faculties.
In addition in line with implementation of the above-mentioned projects, Metinvest has not only focused on cost savings and production expansions but also on reducing negative environmental effects. For instance the introduction of a new blast-furnace gas pipeline at Azovstal will reduce the amount of the mill's carbon acid emissions in the atmosphere, while the modernization of AKHZ will also mean significant ecological gains.
To sum up, the abovementioned projects will allow Metinvest to reduce its primary cost of production through the introduction of energy and raw material saving technologies, to reduce its dependency on raw material uncertainty by increasing the group's iron ore production facilities through development of new levels of existing deposits and enrichment plant modernization, and to increase its production volumes and the quality of produced products through introduction of new capacities and through modernization existing ones.
Looking forward, Metinvest is set to continue investing in the development of its business. In the next five years, the group plans to invest about $5 billion in the modernization of the production capacities of its enterprises, in the introduction of new technologies, including production process automation, labor force security and the preservation of the environment.