·        Azovstal Iron and Steel Works (Azovstal) is one of the major Ukrainian integrated metallurgical enterprises. Its production capacity is approximately 6m tonnes of pig iron, over 7m tonnes of steel and 4.65m tonnes of rolled steel per year. The combine is a large producer of pig iron, steel slabs, steel plates, sections, structural shapes, rails, consumer goods and slag products. Azovstal’s products are shipped to many companies of machine building, shipbuilding, carriage making and power machine building. Its products comply with most of world standards for quality, they comply with many leading certifying organisations and find a market in more than 30 countries. 

·        The combine was founded in 1933. Today it is a fully integrated metallurgical plant, which comprises the following workshops: blast furnaces workshop, steel making and rolling mills. The combine also has a highly developed transportation infrastructure, including its own seaport, capable of processing large-sized steel plates, slabs and other metal products, as well as loose goods.

·        Azovstal today is an advanced metallurgical combine, which is able to solve complicated  technological problems. The combine performs modernisation of its facilities on a continuous basis, thus providing compliance of its technologies and products’ quality with the world standards. Azovstal also pays a lot of attention to the ecological programmes.

·        The combine is a large investor in many sectors of the national economy of Ukraine. It is one of the founders of The First Ukrainian International Bank, sea shipping company JSC “Kometas” and a number of others, including small- and medium-scale enterprises in such lines of business as innovation activities, applied scientific research, etc.

PRODUCTION CAPACITY & TECHNOLOGY

Azovstal comprises the following workshops:

1)      Pig iron: pig iron is made in modern blast furnaces (most of the technological facilities were commissioned in 1970s); all major pig iron production processes are mechanised and automated, or even computerised. Blast furnace melt involves use of the natural gas, fuel oil and oxygen. Ladle treatment with various reagents is done for production of high quality hot metal.

2)      Steel making: steel is made in electric-arc furnaces, oxygen converter and tilting open-hearth furnaces using various methods of ladle treatment of steel with natural gases, liquid alloying materials, vacuum-degassing as well as combination of the adobe. All steel making units are equipped with modern machinery and automation.

3)      Rolling: the rolling complex of Azovstal comprises:

·        blooming mill

·        plate Mill “3600”

·        rail-and-structural mill

·        merchant and ball rolling mill

·        rail fittings shop

The technological facilities of the rolling complex make possible to manufacture rolled plates having accurate gauges and flatness. Most of the rolled products are the hardened rail-road rails of various types and purposes.

The combine is a modern metal works implementing wasteless technologies. Phosphorous slags obtained during steelmaking processes are used for production of fertilisers for agriculture. Blast furnace slags are utilised in production of various kinds of building materials (mineral wool plates, slag pumice, granulated slag, crashed stone).

RAW MATERIALS

Azovstal receives iron-ore concentrate from the beneficiation plants of Krivoy Rog iron ore basin, i.e. Central ore enrichment plant (or GOK) and Inguletsk GOK. Komsomolskoye RU supplies the combine with limestone used for production of lime. In overall volume of coke supplies the share of  Donbass mines is 80%, the remainder is supplied by Polish companies. Azovstal’s need in pellets is covered by both its own production and external suppliers. The own production of agglomerate covers the combine’s needs only by 40%; lime is fully produced by combine itself.

Every month Azovstal consumes about 170,000 tonnes of agglomerate (some 40% is produced by its own sinter plant, the remainder is purchased from Severny and Uzhny GOKs, as well as from Mariupol ISW of Iliych). Starting from April 1999 Azovstal has been purchasing cheaper agglomerate, produced by Kamish-Burunsky iron ore combine (KBIOC). The latter has production capacity of some 1m tonnes of agglomerate annually. Cooperation with KBIOC and Uzhny GOK allows Azovstal to minimise its purchasing risks.

PRODUCTION

Major products

Azovstal is a leading Ukrainian producer of all basic ferrous metals products: pig iron, steel slabs, rolled steel. The combine’s steel plates comply by its sizes and mechanical properties with domestic and international standards, as well as national standards of USA, UK, Germany. Plates and heavy plates can be supplied in as-rolled or heat-treated condition. Some rolled products are made by controlled rolling method.

The product range of the plant includes:

1) Billets for further re-rolling:

·        hot-rolled square billets (100х100, 120х120 and 125х125mm, with length up to 6,000mm;

·        concast slabs, converter steel (250-300 х 1,550-1,850 х 5,000-9,000mm of fully killed, low-alloyed and alloyed steel).

2) Steel plates:

·        for electric welded pipes (8-32 х 1,880-3,200 х 5,800-12,000mm, of low-alloyed steels);

·        for shipbuilding (8-130 х 2,000-3,200 х 6,000-12,000mm, of various steels);

·        for pressure vessels and boilers (8-200 х 1,500-3,200 х 4,000-12,000mm, carbon and low-alloyed steel);

·        for bridge construction (8-160 х 2,000-3,200 х 6,000-12,000mm, of low-alloyed steels);

·        plates with higher strength;

·        plates of structural quality steel (8-160 х 2,000х3,200 х 6,000х12,000mm, steel plates and wide strips rolled of universal quality steel);

·        plates of normal quality (8-160 х 2,000х3,200 х 6,000х12,000mm, carbon normal quality steel plates).

3) Shapes and sections:

·        round steel bars for mill rods (mass 61.6 kg/m, diameter 100 mm);

·        rail-road rails (grades R50, R65, S49, R24, OR50, OR65);

·        rail fasteners (plates of spike fastening for railway R50 and R65, plates with separate fastening for R50 and R65 rails, double head fishplates for R50 and R65);

·        hot-rolled equal angles of carbon and low-alloyed steel (125-200 х 125-200 х 9-30mm);

·        hot-rolled unequal angles of carbon and low-alloyed steel (200х125х11,12,14,16 mm);

·        carbon and low-alloyed steel I-beams (140-450 х 73-160 х 4.9-9 mm);

·        steel I-beams for special design (240-450 х 110-150 х 8.2-10.5mm);

·        strengthened I-beam for monorail tracks (162х70х7mm);

·        carbon and low-alloyed steel channels (160-300 х 64-100 х 5-6.5mm);

·        special channels for railroad car construction (180-300 х 89-100 х 8-11.5mm);

·        special channels for tractors (240х85х9.5mm);

·        shapes for special purposes – for sheet piles, hot-rolled steel shapes for welded Z-piles with high supporting power, hot-rolled section for mine timbering, rolled steel shaped for side chutes of scraper conveyers, hot-rolled symmetrical bulb steel for shipbuilding);

·        grinding steel balls (62-125mm diameter).

4) Consumer goods:

·        cut glass

·        furniture

5) Metallurgical slag products

Today Azovstal has a Quality Management System adopted by the American Petroleum Institute and Canadian Certification Bureau as corresponding to the requirements of API Specification Q1 and ISO 9001 (certified in 1996) with approval of the combine as a manufacturer of steel plates, concast slabs, billets, rolled plates of carbon, alloyed and low-alloyed steels according to API Specification 2H and 2Y.

The combine’s products (shipbuilding steel, a number of structural steel grades, some grades of plate steel) are certified by the following certification societies: Lloyd’s Register of Shipping (Great Britain), Germanischer Lloyd, Det Norske Veritas (Norway), American Bureau of Shipping, Bureau Veritas (France), TUV-Berlin-Brandenburg, TUV-Rheinland, Maritime Register of Shipping (Russia), etc – 23 certificates in total.

Production performance

Azovstal is a sole Ukrainian producer of the following products: rail fasteners, grinding balls, railroad rails, abrasive dust for ship hull cleaning.

The combine is the third largest steel manufacturer in Ukraine. Its production capacity is 6m tonnes of pig iron, 7m tonnes of steel and 4.65m tonnes of rolled steel annually.

In 1998, Azovstal’s commodity output was UAH 1,889,952,000 (in 1997 – UAH 1,758,479,000). In actual prices, the increase in output was 7.5%, but in real terms (i.e. physically) the output volumes decreased. The increase in commodity output of agglomerate was +3%, the change in output of pig iron, steel and rolled steel was -21%, -19% and -19%, respectively. It’s worth mentioning, that these figures are much lower than the average ones of the industry as a whole.

In 1999, the downtrend in production was overcome. After 9 months of 1999 Azovstal managed to increase production volumes of all product groups. In particular, the output of agglomerate was 104.3% as compared to the same period of the previous year, pig iron – 105.9%, steel – 119.8%, rolled steel – 120.6%. In terms of money the commodity output for 9 months of 1999 was UAH1.8 bn. (135.8% as compared to the same period figure of the previous year).

Azovstal’s production in 1997-1999

Million tonnes, unless otherwise stated.

MARKETS & CUSTOMERS

By its technical properties rail-and-structural mill of Azovstal is the only mill in Ukraine capable of producing broad-gauge railroad rails in thermo-treated and non-thermo-treated condition. The combine aims at competing not by means of mere dumping, but by means of offering steel plates of high quality and complying with any and all modern standards, as well as high-tech steel grades. Thanks to the fact that Azovstal is the major producer of steel for shipbuilding, boilers and bridge construction, as well as strips in the CIS market, the combine’s hot-rolled plates are in a more advantageous position in the international markets, than its Russian competitors, and find a market even at relatively high prices.

Today Azovstal sells its output to metallurgical and machine-building enterprises of Ukraine, CIS and other regions. The increase in commodity output of Ukrainian machine-building, which took place for the first time in 1999 (according to the Ukrainian Statistics Committee), is believed to cause the rise of Azovstal’s domestic sales. At the same time, the favourable situation in the international market will probably allow the combine to extend its share in the world markets.

The annual capacity of Ukrainian domestic metal market, estimated at 5m tonnes, is unable to consume the total output of Ukrainian iron and steel works. It’s quite naturally, that for most of major Ukrainian metal works the top priority in their sales programmes is the international market. Thus, in 1998 exports were US$5.8 bln. (7% less than in 1997).

Azovstal’s products are exported to more than 30 countries. Its partners are such companies as RAO “Gazprom” (Russia), Tussen, Ferro-Staal, Wagner, Siemens (Germany), Duferco SA (Switzerland), Samsung (Korea), MetalsAsia (Hon-Kong) and many others. Of the total sales 60% is exported to world markets, 11% - to Russia and CIS, 29% is consumed domestically.

The combine has a vast foreign dealer network; Azovstal’s dealers are the following companies: A.S.M. Stelltrading (Germany), AEKS (Turkey), Promsider (Italy), Azovlitas (Lithuania), Azovmet (Russia), Azovromet (Romania).

PROSPECTS FOR THE FUTURE

The primary technical progress trend of metallurgy industry is the growth in steel output in electric-arc furnaces, using continuous casting machines for all pouring steel.

In this respect Azovstal faces the barest necessity to invest in the expansion of this facilities. Credits secured by Chinese People's Republic Government of US$12.7m could be one of possible ways of this project financing. The project includes the construction of 6-strand continuous casting machines, allowing to reduce energy consumption by 20%.

In 1999, in order to increase the output of pig iron, Azovstal completed upgrading the blast furnace №4, which has the most efficient production properties. This furnace has the installed capacity of 4,000 tonnes of pig iron per day (it is 1.25 times more, than the capacity of the blast furnace №3). The reconstruction complex (investment project) includes the system of casting yard aspiration, preventing dust and smog emissions. Besides, the supply of steam and blowing to electro-seam-air blowing house was improved.

These projects' realisation coupled with the realisation of Ukrainian governmental program (which deals with the development of the country's mining and smelting complex, including the partial arrears restructuring and state guarantees on metal products' export activities) is focused on the increase in money flowing due to extending of sales volume and saving in raw materials conservation in the production process.

FINANCIAL RESULTS

In the period of 1996-99, Azovstal demonstrated steady trends to growth. But the year of 1998 was an exclusion, when the plant's volume of sales fell to 1,899,324,700 Hryvnas (-3.3% as compared with 1997). According to the volume of gross revenue in 1998 fiscal year, Azovstal took the firth place (the third place - in 1997) among Ukrainian metallurgical works. Ten months of 1999 showed, that sales volume of the mill amounted to 2,075,388,100 Hryvnas. In 1999, the positive flow of gross revenue was achieved due to improvement of international market conditions and Hryvna's devaluation (by 31.5% in 10 month period).

The following growth of sales volume is mainly confined in irregularity of iron ore raw materials supply by Ukrainian ore enrichment plants (as a result of the problems accumulated in mining field, such as: backlog of overburden operations, tariff escalation on electricity, gas and transport). Due to the shortage of domestic raw materials, the plant has to utilise import stuff. It increases the prime costs on metal products and reduces capital investments in technical re-equipment of the combine.

Balance sheet

Balance sheet for 1998 and 9 months of 1999

Thousand of US dollars, unless otherwise stated