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NLMK Approves Key Parameters of 3rd Phase of its Upgrade Program

04/25/2008 - NLMK announces Strategic Planning Committee approval of key parameters for Phase 3 of the Group’s Technical Upgrading Programme, which runs through 2015 and features expansions at nearly all of the company’s production sites.

NLMK, Russia, announced that its Strategic Planning Committee has approved the key parameters of Phase 3 of the Group’s Technical Upgrading Programme, which runs through 2015.  
 
Completion of Phase 2—NLMK is currently implementing the 2nd Phase of its Technical Upgrading Program; this phase of the program is expected to be completed by 2011. Upon completion of the 2nd Phase, NLMK will have increased production at its Russian sites to 16.3 million tonnes of crude steel—12.4 million tonnes at the main production site in Lipetsk and 3.9 million tonnes at Maxi-Group facilities. Annual rolled product volume at the Lipetsk site will reach 5.5 million tonnes, and long products at Maxi-Group facilities will amount to 4.0 million tonnes. Total investment capex covered by the 2nd Phase of the Program is more than USD 4.4 billion for Novolipetsk Steel and its subsidiaries and c. USD 1.8 billion for Maxi-Group.
 
Plans for Phase 3—The 3rd Phase of the Technical Upgrading Program, as approved, includes investment projects for the period from 2009 to 2011, and outlines NLMK’s production strategy until 2015. This new phase of the Program foresees annual crude steel production in Russia growing to 22 million tonnes, flat steel products to 6.9 million tonnes, and long steel products and pipes to 5.9 million tonnes. Total investment capex for the 3rd Phase of the Program will be USD 4.1 billion for the Lipetsk production site and c. USD 2.0 billion for Maxi-Group facilities.
 
For NLMK’s overseas production sites, the Program will target annual production of 3.1 million tonnes of crude steel and 6.4 million tonnes of rolled steel products.
 
Phase 3 Objectives—NLMK’s objectives for the 3rd phase of its Technical Upgrading Program include the following:
 
  1. Increase crude steel production volumes at NLMK’s Russian sites to 22 million tonnes by 2015. Further targets that will support this objective include:
    1. Increasing annual BOF steel production at the Lipetsk site to 14.5 million tonnes.
    2. Increasing annual EAF steel production at the Lipetsk site to 1.5 million tonnes. To accomplish this objective, NLMK plans to construct a new facility on the Lipetsk production site comprising an EAF, thin slab caster, and hot-rolling mill.
    3. Increasing Maxi-Group’s annual EAF steel production to 6.0 million tonnes.
  2. Increase flat steel production at NLMK’s Russian sites to 6.9 million tonnes. Targets supporting this objective include:
    1. Lipetsk site will produce 6.9 million tonnes of hot-rolled steel by 2012, including 1.3 million tonnes on the new casting and rolling mill.
    2. Cold-rolled and pre-painted steel production volumes will amount to 4.9 million tonnes by commissioning cold-rolling mills, galvanizing lines and a new pre-painting line.
    3. By the end of 2008, NLMK will reach a final decision on whether to order a Togliatti EAF steelmaking plant with 2 million tonnes hot-rolled flat steel capacity
  3. Increase long steel product and pipe production on Maxi-Group sites up to 5.9 million tonnes. Targets supporting this objective include:
    1. Production of 1.4 million tonnes of wire rod and high-strength rebar at the Nizhnie Sergi site in 2008.
    2. Commissioning of a new 1.0 million tonne/year long product mill for production of wire rod at Berezovsky in mid-2008.
    3. Starting construction of the first stage of Kaluga EAF steelmaking plant in 2008 with 1.0 million tonne rebar and shaped profile capacity by 2011, and 3 million tonnes annual capacity by 2015.
    4. By the end of 2008, NLMK will reach a final decision on whether to construct a Voronezh EAF steelmaking facility with 2 million tonnes of annual long product capacity.
  4. Develop electrical steel production program. By 2015, NLMK plans to produce at least 400,000 tonnes of transformer steel. The share of Hi-B grades in total transformer steel production volume will exceed 70%.
  5. Develop self-sufficiency in basic raw materials. Although NLMK currently covers 90% of its requirements in iron ore and 100% in coke, the company is planning a number of projects to ensure raw materials self sufficiency through the significant planned increases in production volumes. To secure the supply of basic raw materials to NLMK, the following projects will be implemented:
    1. Commissioning the first stage of pelletizing factory with the capacity of 3 million tonnes in 2011 and a further increase to 6 million tonnes in 2014.
    2. Development of the Zhernovskoe-1coking coal deposit with 3 million tonnes capacity in 2011.
    3. Increase coke production to 6.5 million tonnes by constructing Coke Battery No. 6 on the Altai-Koks site and simultaneously closing four coke batteries on the Lipetsk production site.
    4. Increase scrap collection on the NLMK and Maxi-Group sites from 2.1 million tonnes in 2007 up to 7 million tonnes in 2015.
  6. Overseas production site development is focused on a key objective of increasing finished steel production and increasing the percentage of high value-added products. Targets supporting this objective include:
    1. Development for the DanSteel production site, including an increase in total rolled steel production to 600,000 tonnes together with increasing production volumes of special grade hot-rolled thick plates.
    2. Development for the NLMK–Duferco Group Joint Venture, including an increase in long and flat steel production to 6.3 million tonnes. The share of high value-added products will amount to 57%. The following projects will be implemented:
                                                               i.      Increasing hot-rolled thick plate production to 0.9 million tonnes at the Clabecq site (Belgium) by 2010 together with the introduction of plate quenching & tempering technology.
                                                             ii.      Increasing crude steel production at the Carsid site (Belgium) to 2.1 million tonnes, including commissioning the vacuum degasser and revamping the continuous slab caster.
                                                            iii.      Increasing flat steel production to 3.0 million tonnes at the La Louviere site (Belgium)  by commissioning a new reheat furnace.
                                                            iv.      Modernization of the Verona Steel site (Italy), increasing plate and forging ingots capacity to 0.6 million tonnes.
 
“The rapid development of the Russian economy is a powerful driver for demand in the domestic steel market,” said Vladimir Lisin, Chairman of NLMK’s Board of Directors, commenting on the company’s plans. “By 2015, we expect steel consumption to soar by 60 to 65%. We anticipate that demand for our steel products to go up in construction, mechanical engineering, automotive, infrastructure and other metal-intensive industries. NLMK’s development plans seek to meet the growing demand in the domestic market.
 
“We intend to expand steel production and output of high quality finished products at all of our sites,” continued Lisen. “In pursuit of this goal, we have decided to significantly increase investment in the development of NLMK’s facilities and have approved the major steps of the 3rd Phase of our Technical Upgrading Program until 2015.Our aim is to strengthen the company’s position in production efficiency and leadership among the steel producers in the Russian market and deliver significant value to all our shareholders.”
 
“The company plans to develop its finished product capacity on the largest foreign markets. The implementation of this strategy results in strengthening NLMK’s leadership in the global steel market and growth in high value-added product volumes. It is a primary goal of the development program of our foreign assets.”