MMK is home market-oriented, Viktor Rashnikov says

BOD Chairman of Magnitogorsk Iron & Steel Works (MMK) Viktor Rashnikov made a report on the supply of metal goods onto the domestic market in the course of a meeting on the Russian metallurgical sector’s problems supervised by Russian Prime Minister Vladimir Putin on July 24, 2008.

MMK’s top executive said over 85% of the Russian metallurgical market’s needs were met by home producers in 2007, and the figures kept coming up every year. MMK, on its part, makes one-fifth of all the metal goods produced in the country, while its development strategy is a prime example of how a Russian ferrous metallurgical enterprise should grow home market-oriented: MMK managed to nearly double its steel and metal goods output in 1997-2007, while its domestic market shipments more than tripled over the same decade. In 2006, the company raised its domestic market shipments by almost 1 million tons compared to a year earlier; in 2007, the home market shipments went up by another 1.3 million tons and reached 7.3 million tons (60% of the enterprise’s total sales turnover).

‘As far as the year 2008 is concerned, we expect to direct all the additional metal goods we make this year to our Russian customers. This comes to about 8.7 million tons of goods, which exceeds the figures for a year earlier by 1.4 million tons. It is the home market’s development that we connect our own growth with, and it is the home market that our production and sales efforts are focused on,’ Viktor Rashnikov said.

MMK BOD Chairman also reported the enterprise started signing long-term contracts with large metal goods consumers, with prices reconsidered in accordance with the latest market trends. Such contracts have already been signed with TMK, OMK, ChTPZ Group, KamAZ, AvtoVAZ, and GAZ Group.

Apart from this, MMK is currently implementing a large-scale investment program, with over $3bn already invested in the company’s technical upgrading and renovation over the last decade. This long-term investment program is valid through the year 2020 and is primarily targeted at meeting the Russian customers’ growing needs. The program is two-fold: in 2008-2013, money will be invested in creating some hi-tech production facilities for making products yet unique to Russia, like plate mill 5000, a multi-purpose cold-rolling unit for making car components, and machinery meant for making metal goods needed in the building industry. The total amount of investments will come to at least $10bn at this stage, whereas the goods output is expected to go up by 15 million tons in 2013 due to increased production of hi-tech products (all of which will be meant for the home market).

In 2014-2020, financing will be targeted at enhancing the production efficiency and making sure the enterprise has a plentiful resource base. This involves the construction of Prioskolskiy Ore Mining and Processing Enterprise in Belgorod Region, developing the iron ore deposit in Chelyabinsk Region, and launching the hot-pressing iron production facility that will replace scrap metal in MMK’s electric furnace steelmaking division.

At the end of his report, Viktor Rashnikov said Magnitogorsk Iron & Steel Works had a long-term, stable, and systematic way of business development and was first and foremost a home market-oriented enterprise that aspired to meet this market’s growing needs.


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