Business plan№ 2 November 2018

Metalloinvest is the fifth largest steelmaker in Russia and a leading manufacturer of high-quality SBQ steel and steel for bridge construction. But the rules of the game on the modern steel market are increasingly tough, as customers set higher standards for rolled products, insisting on superior quality and a combination of properties in products. New players are entering the Russian SBQ market and Metalloinvest faces fierce competition in foreign markets. Nevertheless, demand for high-quality Russian SBQ remains high, and Metalloinvest is targeting an increase in its SBQ exports.

The company has set ambitious goals for the Oskol Electrometallurgical Plant (OEMK) as part of the programme to develop sales and improve customer focus in the SBQ segment. The tasks include:

  • strengthening the company’s position in the high margin, high quality steel segment;

  • increasing annual SBQ production capacity at OEMK by 300,000 tonnes in 2021 compared with 2016.


The main stages of the project will be as follows.

Modernising and upgrading technologies

Metalloinvest has always been focused on technology, and the SBQ project is no exception. In 2017, a reduction and calibration section was commissioned for the mid-size production line of Rolling Mill 350 at OEMK. The new unit offers the following advantages:

  • improved quality of rolled steel, particularly SBQ;

  • reduction of metal losses during turning;

  • higher productivity at Rolling Mill 350 and the rolled product finishing plant.

Equipment for the project was supplied by Germany’s SMS Group GmbH, and the design documentation and cost sheet were prepared by the Metalloinvest subsidiary, Gipromez.

In 2018, OEMK began work on a heat treatment section for hot-rolled steel with annual capacity of 70,000 tonnes. Investment in the project will be approximately 3 billion roubles. The new section will increase the heat treatment capacity for rolled products and improve product quality. OEMK also plans to change its product structure towards more high-margin and priority products.

OEMK’s plans include refocusing its product structure on higher-margin, higher-priority products

“We see high demand from customers for high-quality long products that require heat treatment,” said the Metalloinvest CEO, Andrey Varichev. “The new capacities will help Metalloinvest to increase sales of these premium products and strengthen its position in the SBQ market.” The new section will carry out various types of heat treatment in a broad temperature range (400-980° C) to produce high-quality rolled products with specific microstructure.

Heat treatment is used in the production of various types of spring, ball-bearing, structural and high-strength steels. OEMK will build a heat treatment facility and two thermal furnaces as part of the project. The building will be equipped with lifting and transfer equipment together with supporting infrastructure. The first furnace is scheduled to be commissioned by the end of 2019 and the second will commence operations at the beginning of 2020.


 

In another important project, OEMK will upgrade its continuous casting machine No. 3 (CCM-3) and carry out technical re-equipment of the 5th and 6th cooling water circuits to enable the simultaneous operation of five CCMs. OEMK began work on this project in 2018. The outcome will be the improvement of the quality characteristics of concast billets from CCM-3 and continuous water supply for the simultaneous operation of five CCMs.


 
Commissioning of the 5th and 6th circuits is scheduled for the fourth quarter of 2018 and the upgraded CCM-3 will commence operations in the third quarter of 2019.

OEMK production modernisation projects 2018–2020


Coordination of sales, logistics and production teams

The coordination between sales and production teams needs to be improved in order to maximise the smooth operation of all departments. The implemented changes will have the greatest impact on the supply chain. Loading and shipment by road will be increased, and new sales channels will be accessed in Europe (most notably, specialised distribution and direct deliveries with the assistance of logistics partners).

Another focus is cost control based on a system of dynamic calculation of logistics costs and review of supplies and deliveries. All of the changes are supported by specialised IT solutions, and a logical system module has been programmed in SAP.

In February 2018, the company completed work on a data processing centre in the town of Stary Oskol (adjacent to OEMK). The centre provides reliable engineering infrastructure for the IT systems that are being implemented, and has enhanced the efficiency of collection, storage and processing of data at Metalloinvest, as well as ensuring information security.

By 2021, OEMK plans to increase its production capacity by 300,000 tonnes a year, compared to 2016 levels

Company IT specialists have implemented a number of solutions, including the installation of software solutions by Quintiq (part of Dassault Systèmes group) at all of Metalloinvest’s key enterprises: Lebedinsky GOK, Mikhailovsky GOK, OEMK and Ural Steel.

Quintiq enables the efficient management of the different elements of the supply chain (various types of orders and transportation tariffs), as well as taking account of fluctuations in commodity prices due to global economic factors and market volatility. The solution also enables calculation of monthly sales planning cycles for steel products using several versions of sales plans, compares different pricing scenarios and takes account of currency factors to sel ect an optimal plan to address demand.

First results

Metalloinvest has successfully invested in improving the quality, productivity, efficiency and development of SBQ production capacity at OEMK. The results of these efforts are already apparent: Metalloinvest shipped approximately 1 million tonnes of SBQ to customers in 2017, up fr om 0.9 million tonnes in 2016. The increase in sales of high-margin products and the growth of its share in the supply structure ensures successful results for the company and the strengthening of its financial sustainability.

Completion of the programme will further enhance margins across the product portfolio. Metalloinvest looks forward to increasing its SBQ export shipments and maintaining its position in the domestic market.

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