Industry№ 2 November 2018
Competition in the steel market is intensifying and customers are making tougher demands on their steel suppliers. Metalloinvest is constantly improving its technologies and developing new steel grades in order to stay ahead of competitors. High-quality rolled steel products (SBQ), produced at OEMK, have a special place in the company's product portfolio.
Tough challenges are nothing new for Russian steelmakers. In 2016, there was a fall in demand for steel products from main customers in the domestic market (as measured by the Russian Ministry of Economic Development). The largest reductions of rolled steel in that year were seen in the automotive, construction, and steel pipe industries. There was some recovery of demand in 2017 and experts are caling 2018 a year of gradual improvement for the Russian ferrous metallurgy. Meanwhile, the deterioration of the US-China trade relationship has created new difficulties in the global market.
The foreign market is a competitive arena for Russian companies. According to data from the Russian Ministry of Industry and Trade (Minpromtorg), the steel industry accounts for about 5% of Russia’s GDP and 14% of exports. The markets least accessible to Russian steelmakers are the EU, US, India and Mexico.
Export of rolled steel is subject to special difficulties. The Russian Steel Association counts more than 50 restrictive measures in force against Russian steelmakers at present (10 new restrictions have been introduced or confirmed in this year alone).
Despite the challenging environment, average capacity utilisation at steel facilities in Russia this year will remain above 80%, according to Moody’s analysts estimates. Key players will focus on improving production efficiency and launching new high-quality products.
According to Deloitte, ferrous metallurgy is one of the most technologically advanced industrial sectors with a high level of commitment to innovation. 64% of steel companies give preference to process innovation, mainly in order to reduce production costs, while 27% prioritize product innovation.
One step ahead
“Competition is growing in the market for high-quality steel products, and customer requirements are becoming more stringent,” said Andrey Varichev, the CEO of Metalloinvest Management Company. “We need to constantly improve our technologies and develop new steel grades for our partners in order to win the competition race.” OEMK develops dozens of new steel grades each year for Russian enterprises and customers in Europe.
Steelmakers do their best to meet customer needs by offering innovative products. EVRAZ, for example, secured an outlet for its rail steels after improving product purity and launching an extensive range of new grades. A special product—super-hard rails—was developed for Brazil using a special rolling process and applying limits to the chemical composition of the steel in order to control the hardness of the product.
Expenditure on introduction of innovations (% of revenue)
It is equally important to provide customers with the services they need. OEMK is well placed to do so thanks to its advanced facilities for processing of rolled products. OEMK not only produces high-grade steel but carries out finishing touches to ensure full customer satisfaction.
The rolled-steel finishing shop at OEMK carries out machining of steel rod produced at rolled-steel shop No. 2 (part of the mill 350), ensuring that products exactly match required parameters. In 2017 OEMK installed a reduction-calibration unit on the medium-sized long product line at the mill 350. The new unit enables production of rolled steel with precise geometric dimensions (diameter tolerance of ± 0.15-0.2 mm) without the need for further work in the finishing shop. Rod produced at the mill 350 using the reduction-calibration unit is ready for delivery to the customer without need for further processing.
SBQ: How to remain the market leader
SBQ includes more than 500 grades of steel and is used to make critical parts in the automotive, mechanical engineering, shipbuilding, aerospace and other industries. SBQ steel is often referred to in Europe as “engineering steel” and in North America as “special quality steel”. SBQ steel often undergoes additional processing (heat treatment, mechanical treatment and surface preparation) to enhance machinability, ductility, strength, hardness, ability to withstand deformation and impact loads, etc.
High-quality SBQ long products account for about a quarter of all Metalloinvest output. “Prices and demand for these products are less subject to market fluctuations than prices for iron ore,” Andrey Varichev noted.
The biggest customer for SBQ is the automotive industry, which uses SBQ to make:
distribution shafts and crankshafts for internal combustion engines;
shafts and other parts for gear boxes;
pistons, struts and springs for shock absorbers.
SBQ is also used to manufacture components for aircrafts and ships.
SBQ steel undergoes heat treatment and various mechanicalprocessing before it is ready for delivery to the customer. Performance of SBQ steel (machinability, ductility, hardness, strength, ability to withstand deformation and impact loads) are being constantly improved by means of testing.
Analysts foresee changes in the product structure of Metalloinvest’s current SBQ customers in the next few years. Transition to the production of electric vehicles in the EU countries will tend to reduce global demand for high-quality rolled steel products. According to Bloomberg, by 2025 growth of the automotive industry will depend mainly on production of electric vehicles and hybrids, and assembly of such vehicles requires 65% less steel than conventional cars. Other SBQ-consuming sectors are not expected to show significant growth.
The production of high-quality rolled streel (SBQ) accounts for approximately a quarter of all steel product output at Metalloinvest
The modern market sets stringent standards for the production of high-quality rolled products. Steelmakers are currently designing programmes to improve production efficiency and investing in innovation and expansion of their product range.
In 2017, Metalloinvest launched a comprehensive programme to improve customer focus and product quality in its SBQ business, including modernisation of OEMK facilities, further expansion of the SBQ product range and development of a sales system.
Growth in output of passenger and commercial vehicles is driving global demand for SBQ
Passenger cars and commercial vehicles production development are both driving SBQ consumption in the segment world-wide
OEMK plans to commission a new heat-treatment complex for rolled products with annual capacity of 70,000 tonnes by 2019-2020. About 3 billion rubles will be invested in the project.
“The new facilities will enable Metalloinvest to increase SBQ sales and strengthen its position in the SBQ market,” said Andrey Varichev. OEMK will build a heat-treatment facility and two thermal furnaces, install heavy-lifting and transmission equipment, and create supporting infrastructure. Company specialists believe that heat treatment (400-980°C) will enable production of high-quality rolled steel meeting with a specific microstructure.
The quality of SBQ produced at OEMK is ensured by the use of steel smelted at the plant with a narrow range of chemical components, low gas content, minimal impurities, increased strength and ductility, and increased machinability. These properties are achieved by the use of pure furnace charge (metallised pellets) for steel smelting. OEMK is the only steel plant in Russia that uses direct-reduced-iron technology (metallised pellets are obtained fr om iron ore concentrate and the pellets are then melted in electric furnaces to produce steel). OEMK does not use blast furnaces to obtain iron ore for steel smelting.
SBQ supplies: long-term cooperation
Russian steelmakers are keen to expand their markets. Metalloinvest set new records for shipments to consumers in 2017, delivering about 1 million tons of SBQ compared with 0.9 million tons in 2016. The company supplies its products to automotive and ball-bearing plants in Russia, Europe and the CIS. OEMK is a long-term supplier to Schaeffler, SKF and Timken, Europe’s leading manufacturers of bearings. Metalloinvest supplies SBQ to AvtoVAZ, Minsk Automobile Plant, GAZ, the truck makers Ural, Volkswagen, Ford, Peugeot-Citroën, Škoda, Daimler and General Motors. SBQ is primarily an export product with around 70% going to the European market.
Today’s steelmakers aim to not only anticipate customer needs, but also to work closely with customers on product development and process optimisation. Metalloinvest has been among strategic suppliers of Russia’s leading truck maker, KamAZ, for more than eight years. In the period from 2009 to 2017, OEMK shipped 400,000 tonnes of rolled metal to KamAZ, which was used to manufacture critical and high-load components and assemblies:
pistons and shafts for engines and gearboxes;
shock absorber parts, etc.
Growth trends in output of electric and hybrid vehicles
Output forecast by engine type, million vehicles
KamAZ sources up to 80% of its high-quality rolled-steel products from OEMK.
Representatives of Metalloinvest and KamAZ meet regularly in coordination councils, wh ere the two companies make joint decisions on expansion of product range, testing of new steel grades, and approaches for optimising warehouse and transport costs.
Cooperation in this area creates new opportunities for Metalloinvest. “The approval for the manufacture of rolled products made from ZF7B steel is currently in hand at ZF of Germany, KAMAZ’s partner in the production of gearboxes,” said Andrey Prosyanik, Director of Domestic Sales at Metalloinvest. “It is a large and important project for this company. KAMAZ’s requirements in terms of product quality and delivery terms are becoming ever more stringent. Coordination councils help us to analyse the work effectively and plan future steps.”
KamAZ sources up to 80% of its high-quality rolled-steel products from OEMK
The development of steel industry is bound to entail stricter requirements for SBQ quality and for the range of SBQ grades and sizes in the future. The automotive, machine-building and ball-bearing industries, will remain the principal market for SBQ, but other factors (sanctions, restrictive measures, price and demand fluctuations, the creation of alternative energy storage systems and materials) could lead to increase or decrease in demand for existing and new SBQ types. A strong business model and carefully designed business strategy will enable Metalloinvest’s SBQ segment to look into the future with confidence.
SBQ (special bar quality) steel is a rolled product with exceptional quality characteristics, which make it suitable for specific applications.