Transformation for Life

Stiff competition is forcing manufacturers to constantly upgrade electrical steel production. Maintain its position in the market can only develop new niche products and expansion in promising regions


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General Director of "VIZ-Stal" Sergei Makurov: "The plant is going to enter the market premium brands of transformer steel"

Uniqueness VIZ-Stal and at the same time its "Achilles’ heel" in that the plant focuses on the production of a single, albeit very in demand in the world market of the product — oriented steel. Stiff competition forces a company to constantly look for new ways to improve the competitiveness and quality of products. The goal — to produce a wide range of transformer steel grades, from mass to premium in order to attract the largest possible number of consumers. On the current market situation and prospects of the plant to our conversation with the General Director of "VIZ-Stal" Sergei Makurova Team.

— Sergey, the financial crisis has exacerbated the competition in the market-oriented steel. What are the plant’s position on the world stage?

— As before the crisis, NLMK Group takes about 10 — 11% of the world market. But the crisis has not only exacerbated the competition. He revolutionized the market: it has transformed from a seller’s market to a buyer’s market. Before the lack of spare capacity spurred electrical steel prices and kept them at a high enough level, buyers and intermediaries have access to the "easy" money and stockpiling of raw materials. Now the demand is much lower than the supply. On the one hand, the consumer is no longer able to store for future use, he has no available funds to become more demanding. On the other — to the beginning of the crisis in China, which was the first major market, has launched its own two transformer steel production. Their power shut down the domestic needs of China by about 75%. As a result, world prices came down. If they had at times exceeded the domestic Russian, it is now almost equal. Today, we still have the consumer market, and global manufacturers are free capacities. According to various estimates, this situation will persist until 2014 — 2015 years, after which the position may change again.


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— If China is actively closing its market, which regions will be included in a priority for you?

— In the past two years, significant customer for us — Europe, it is 30 — 35% of our portfolio. But the most interesting and promising, we believe India. First, it is the only market in the world except Africa, are not provided the raw material for the production of electrical equipment: there are no domestic producers of electrical steel. Second, it is the second country in the world in terms of population, with here is extremely low level of development of market power. Therefore, not only we, but also other international manufacturers see India as the most capacious and promising market. Unlike China, which has already satisfied, or Southeast Asia, where the competition is very tough.


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— In early October, NLMK acquired in India service center National Laminations. What are the prospects it opens up to the plant?

— In-house services in this country for a long time in the plans of companies, because we bring the goods here can only sea. This means that from the time of order to delivery of the final product may take more than three months, while our competitors can do it almost in a week’s time. But if large consumers can afford to wait three months, small — no. And in India, a lot of buyers, demand does not exceed 5 — 10 tons, it is one or two rolls. Thus, the acquisition of the service center allows us to expand our presence in the Indian market and become closer to the consumer. Service more interesting to us, and with the logistic point of view: it is near the port through which the bulk of our metal and has sufficient stepping stone warehouse space that allows us to solve our mission — expanding market share.

TAKE DEFENSE

— Before the crisis, more than 80% of transformer steel produced in Russia, was exported. There is growing demand for it in the country now that the power company does not stop talking about the implementation of the investment programs?

— According to preliminary estimates, the growth in domestic consumption in 2011 is, albeit slight. While we can only state this as a fact. It is difficult to estimate, due to what is happening. It seems to be investing significant resources in the modernization of the equipment of power companies at the hearing. But we as producers of basic element for transformers do not feel it. Yes, there is a positive trend. But to say that the domestic market there has been a certain tendency of growth of demand, it is too early.

The fact is that today, a lot of components and finished transformers imported, and not just resellers, but also the major Russian energy companies. It is no secret that they are placing orders, particularly in the power and distribution transformers and abroad. I understand if it were the world’s grandees such as Siemens or ABB, but more and more imports come from China. And I think that our country, our manufacturers of electrical equipment need to learn from China to protect yourself and your market.

— Are you talking about the request of the Chinese manufacturers tenfold increase duty on Russian transformer steel?

— They suggested that the Government of the PRC to set it at 65%. In the near future China should see two local major manufacturer of power that can be directed to fill the remainder of imports and exports. And we have no doubt that the Chinese government will support their companies. True, maybe not in such a harsh manner. Previously, American manufacturers are already duty was set at 25 — 26%, which is equivalent to killing a competitor, regardless of the quality of its products.

— And on the Russian market of electrical steel is competition?

— It is very small and only on price. The entire consumption of the domestic market with the CIS countries — about 40 thousand tons per year, of which, according to our estimates, since the beginning of the year was brought under one pretext or another no more than 2 tons.

Yes, the domestic market is trying to import clove. But in principle, and direct consumers, and resellers note that our response is better, which is important for the final product. We do nedotyagivaet to Japan and give in a little Koreans, but if you compare the comparable metal from Russia, Germany and the United States, we do not lose. With China, I do not compare. I will say this: the specifics of the production of transformer steel — this particular experience, and some achievements. Construct equipment if you have money and desire — not a problem. And China has proved it to us. But at the same time ensure the quality of manufactur
ed metal is difficult.

— Then from which to protect the domestic market?

— From the import of finished electrical equipment. Our consumers to do more transformers, and therefore take more Russian steel and copper wires, insulators. To Russia came not in transformers, and consumers who need them. We, for example, for a program of technical re transformers purchased by the consumer of our steel in Russia. Though they could afford to buy in Europe.

NEW NICHE

— You are now underutilized?

— We are working at full capacity utilization. Mainly because just found a way to improve the quality of products. Of course, in 2009, under the impact of the financial crisis, we have been forced to suspend the implementation of a large-scale program of technical re-equipment due to lack of available funds. But that does not mean that the company is not fully turn on investment. After all, in the face of fierce competition in high demand steel having a high consumer properties. Therefore, we continued to implement the projects, which in the quickest time possible the results do not require large investments. As a result, we succeeded in reducing the first specific magnetic losses in the steel of 0.27 and 0.30 mm for 3 — 4%. Then, for two years, we have launched a range of stages of laser treatment of steel. It is possible to reduce specific losses in grain-oriented electrical steel in an average of 8 — 10%. Now the fraction of the metal of the highest grades of more than 90% of our total production.

With the new product we were able to occupy a niche in the domestic as well as foreign markets. In particular, Siemens believes that our metal produced by traditional technology, but the laser-treated — is a specific product that can fill the niche between traditional and high permeability transformer steel or premium, which is obtained.

— When going to do to market high-permeability steel (AMS)?

— Finish the program of modernization and planning to start production of the UPU in 2013. A number of the necessary facilities already works: laser system and a set of high-temperature annealing furnaces. Now we finish the installation of a new cold rolling mill and next year will begin to develop its capabilities. Finishes and design of metal heat treatment line. In total, plan to release in the year to 70 thousand tons of CHD.

— Are you sure that the new capacity will be needed?

— Finish this project is simply necessary: otherwise we will lose a significant share of the world market. Today, consumers are on the electrical steel sheet metal path substitution made by conventional techniques, the metal with higher properties, primarily electrical. UPU — this is a premium type of transformer steel, the properties of which can significantly reduce the cost of transmission and transformation of energy. It first.

Second, the major consumers prefer to buy the metal at those who can provide a greater choice of metal of different brands. For them, it is more convenient to buy everything in one place: in addition to solving logistics problems they can count on discounts and deferred payment. Therefore, we need to expand the product line to produce the whole range of brands transformer steel.

— The problem of cost growth in front of you is not worth it?

— Part of technical re-equipment program aimed at significantly, by an average of 20% reduction in the cost of production of transformer steel. Thus, the installation of reforming of natural gas will reduce the power consumption is 37 times. With it, we will produce the hydrogen needed in the technological cycle of production of transformer steel. While at the factory produce it by electrolysis.

Speaking of raw materials, we are since 1995 in a state of struggle for the metal. Tackle supplies us with NLMK’s real money. Therefore, saving metal — basic truth for all plant employees.

— How do you see VIZ-Stal after 10 — 15 years?

— The main task — to enter the market with CHD We are also thinking about the production of steel with a thickness of 0.18 mm, which is already doing some of our competitors. I am convinced that the new facilities will allow us to implement these plans. And, of course, I have very high hopes for the domestic market. If Russia wakes up in the foreseeable future and will be developed at the same pace as China, we are not only able to increase domestic supplies, but we have to expand the capacity to provide the country with the necessary amount of electric steel.

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