Svetlana Stepanova, Valery Sergeev
International Cooperation Department, Ministry of Industry and Power of the Russian Federation
Vitaly Shumaev
Republican Research Scientific & Consulting Center of Expertise

    Russia is an important member of world steel market. It is No.3 in ironmaking and steel tube/pipe production, No.4 in crude and rolled steel, No.6 in DRI output. Russia persistently occupies the second position in exports of steel and rolled products (9 % of sales in world markets), a little behind Japan, being No.1 in export of steel semi-products (over 20 % of world export) and the largest (together with the USA) scrap exporter. The annual revenues received by the Russian steel industry due to export amount to more than US$22bn.
    In the 1990s an active penetration of the Russian steel industry to world markets was a natural response to a radical fall of domestic demand as a result of the collapse of the economic complex of the FSU. Up to 2002 the consumption of steel products in Russia was at a very low level of about 20m tpy. Now steel production in Russia is more than 65 million tpy which is almost in line with the pre-reform figure.
    The basis of competitive ability of Russian steelmakers is the world lowest prime cost of crude steel. This advantage is especially noticeable in the periods of a falling world market condition when a reduction of export margin makes it inefficient to export steel products from a whole number of countries, above all, from the EU. A real obstacle for the Russian export is only trade protectionism of some importing countries.
    High-quality carbon steel flat products, structural long products and semi-products dominate in the Russian steel export structure. Lately a share of steel tubes and pipes is continuously growing. The export items are also pig iron, ferroalloys, alloyed-steel rolled products, steel structures, DRI products, wire products.
    The traditional regions of Russian export are South-East Asia, Middle East, the EU and the USA as well as the post-Soviet countries. For a long time China has been the biggest market for Russian steel companies but today due to a substantial growth of the domestic steel industry in this country, the priorities have changed and Turkey occupies the first place among the importers of the Russian steel products.
    Russia as well as Brazil is the largest pig iron supplier. It accounts for one third of world export. The sales of Russian pig iron in the foreign markets continuously grows achieving 5.5 million ton. In Russia 16 enterprises have ironmaking operations. Integrated iron & steel works produce the largest pig iron tonnage but they mainly make hot metal for own steelmaking operations. Meantime the main suppliers of commercial pig iron are Tulachermet, NLMK and NKMK (the latter is incorporated into EvrazHolding).
    The Russian steelmaking potential is about 75 million tpy, with a utilization rate approaching 90 %.
    One major export item is commercial steel as semi-products. For the last five years, its export is kept at a level of 11 to 12 million tpy, with 13.4 million ton in 2004 when the most favorable market structure was noted. The main consumers include Taiwan, Turkey, Iran, China, Thailand, the USA.
    Russia is among the world leaders of flat products exporters sharing the 3rd and 4th places with the Republic of Korea and accounting for about 8 % of total supplies of this commodity. The Russian flat steel is invited to China, Italy, Turkey, India, the USA, Byelorussia, Iran, Republic of Korea and Germany. The export tonnage is stably kept at a level of 11.5 million tpy on the average. In 2004 out of 18.2 million ton made in Russia, 11.7 million ton (64 %) were exported.
    On the contrary, production of bars and sections is oriented to the domestic market. In 2004, only 4.45 million ton (17 %) out of 26.6 million ton made was exported.
    Russia, with a powerful tube and pipe making sector, has a shortage of pipes of certain types. Up to recently, for example, there have not been any production operations for large-dia. (1420mm-dia) pipes for long-distance pipelines in Russia. Now Russian companies are trying to master this production in stiff competition with approved leaders. Simultaneously they expand business activities in foreign markets having occupied strong positions in individual market niches in Europe, China, India and Turkey. In particular, Russia accounts for 30 to 40 % of general-purpose seamless tubes and 20 to 30 % of low-alloyed structural tubes and oil-and-gas tubing in the EU. Lately the export of tubes and pipes from Russia grew from 10 – 15 % (of the total volume of their production) to 26 %.
    Ferroalloys is an important export item of the Russian steel industry. Their supplies to the world market grew from 400,000 ton in 2001 (in 2001 – 2002) to a present figure of 680,000 ton. The biggest portion in the structure of the Russian export of ferroalloys belongs to ferrochrome (40 %) and ferrosilicon (37 %), with 28 % for ferrochrome and 20 % for ferrosilicon in value terms. Further on there are ferrovanadium and ferrotitanium (17 % each), ferromanganese silicon (6.5 %) and ferronickel (5.5 %).
    As compared with South Africa, China and Australia, Russia has lower capabilities in this market niche due to an inadequate own raw materials base. The Russian output of manganese ore and chromites is very low, and for this reason Russian ferroalloys producers to a large extent depend on foreign trade relations with raw materials suppliers. On the other hand, Russia has quite adequate resources for production of ferromolybdenum and ferrotungsten. The main importers of the Russian ferroalloys products are Netherlands (17 % of sales), Japan (16 %), the USA (13 %), Germany (10 %) and Finland (9 %).
    The largest Russian ferroalloys producer is the Chelyabinsk Electrometallurgical Works which accounts for over 50 % of their output in the country. This enterprise makes a wide range of ferroalloys thus providing for big advantages in competitive struggle.
    Russian steelmakers implement large-scale investment programs. The build-up of investments in the fixed corporate capital is estimated at 8 to 10 % per year on the average. It will bring about further production growth in tonnage and quality. None the less, in the medium and long-term prospect, it will be required to set up new production sites to ensure larger export of steel products. Just now the utilization rate of the industrial equipment is close to a maximum figure and fast-growing domestic demand leaves less and less place for build-up of exports.
    Presently only Tulachermet plans to build high-capacity steelmaking operations. Along with it, in the favorable situation developed now, good prospects are open for a set-up of a group of 0.1 to 1.0m tpy mini-mills. Enormous reserves of scrap and other basic resources in Russia permit these plans to be implemented.
    Table 1
    Export of Russian steel products
     2000 2001 2002 2003 2004
    Pig iron, million ton 3.69 3.65 4.19 4.73 5.54
    Ferroalloys, ,000 ton 408 372 389 540 676
    Alloy-free steel semi-products, million ton 11.8 12.4 12.2 11.1 13.2
    Alloy-free steel flat products, million ton 11.2 9.4 11.6 11.6 10.6
    Tubes and pipes, ,000 ton 771 923 977 1,155 1,583
    ____________________
    Source: data of Rosstat and Federal Customs Service of the Russian Federation.
    Table 2
    Consumers of Russian steel products, US$ million
     2002 2003 2004 2005 (1st half)
    Total 7,756.5 10,278.4 18,807.3 11,068.8
    Including:
    Turkey 656.2 1,013.3 1,777.9 1,063
    China 853.8 1,287.9 1,356.9 1,009.2
    Italy 364.1 368.2 1,185.4 895.8
    Taiwan 314.8 629.7 1,650.3 773.5
    USA 381.6 264.8 1,646.7 769.1
    Iran 427 790.4 916.3 538.6
    Netherlands 128.6 203.6 509.9 490.6
    Byelorussia 590 851.2 1,386.9 477.5
    Germany 201.3 153.1 596.6 450.5
    Kazakhstan 252.2 416.7 627.5 449
    Republic of Korea 306.5 431.8 688.2 445.7
    Ukraine 218.2 332.9 544.3 373
    Thailand 69.7 77.7 327.8 329.2
    India 119 183.7 275.2 259.3
    Source: Russia’s customs statistics
    Table 3
    Main importers of Russian steel tubes and pipes, ,000 ton
     2002 2003 2004 1st half of 2005
    Total 977.1 1154.9 1583 808.5*
    Byelorussia 143.1 165 193.7 -
    Italy 51.2 80.1 119.4 81.4
    USA 5.2 7.5 51.7 58
    China 21.4 24 71.9 45.5
    Germany 79.5 52.5 83.7 43.5
    Iran 52.8 66.1 36.2 42.4
    Netherlands 18.9 40.6 44.8 42
    Turkey 22.6 43.4 75.3 38.6
    Malaysia 2.9 5.4 2.4 26.7
    United Arab Emirates 1.1 10.1 26.8 26.3
    ________________
    * Without supplies to Byelorussia taken into consideration.
    Source: Russia’s customs statistics .
    Reference:
    High production concentration is a typical feature the Russian steel industry. Three biggest integrated iron & steel works (MMK, Severstal and NLMK) account for almost 50 % of crude steel production. Their proportion, combined with that of NTMK, ZSMK and NKMK incorporated into EvrazHolding, is 72 %. The large steelmakers also include Chelyabinsk Iron & Steel (Mechel Group’s assets), Uralian Steel, Oskol Electric Steel and Tulachermet specialized in commercial pig iron. The main industrial area is Ural where about 40 % of Russian steel is made. 

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