Igor Malyshev, Oleg Kalinsky
Russian Ministry of Industry, Science and Technologies

B

ased on the results of 2002, the production index was 103 % in the steel sector and 106 % in the non-ferrous metals. At first glance, the situation is quite safe as the pessimistic forecasts on decline in the steel sector and stagnation in the non-ferrous metals sector have not materialized. The industry even proved to be among the leaders behind only of the fuel industry (107 %) and the food industry (106.5%). However the positive production dynamics was achieved for the most part due to the supply of flat products for export and the mining of precious metals. Exactly these fields saved the industry because the other sectors showed either minimum growth rates or even production drop to 97.1 % in copper, 94.9 % in nickel, 94.6 % steel tubes/pipes.
The finished rolled products account for about 60 % of the total steel products. An increase of the flat products share by 8.2 % was accompanied by the growth of their prices in the Russian and world markets. The long products volume remained virtually the same at a level of 27.3m tons or 100.6 %. A small increase of the long products consumption (by 3 %) was evident in the Russian market as a result of restrictive duties imposed by the Russian government on imports of similar products from Ukraine and Kazakhstan.
The production of steel tubes/pipes oriented for the most part to the Russian market fell by 5.4 % which was caused by several reasons. Above all, in 1999-2001 the Russian production grew by 85 % which resulted in a partial overstocking of the market. The second reason seems paradoxical – a reduction of demand in the oil sector! This should not have come to pass with current high prices for oil and a 7 % growth in production in this country. But oil companies made up their 2002 budgets in 2001 in a less favorable situation which dictated the low level of tubes/pipes purchases. By the bye, the same reason impacted the oil sector. In 2002 the development drilling was reduced by 16.8 %, with exploratory drilling, by 40.2 % while the commissioning of new wells dropped by 21.9 %. On the other hand, the production of tubes was restricted by an inadequate supply of strip which was attributed to the export re-orientation of the flat product makers.
For the first time in the last three years in the Russian market, rolled steel consumption fell by 2.5 %, and, in particular, the consumption of flat products was reduced by 7.7 %. It was mainly connected with an unfavorable situation in the automotive industry. In 2002 the biggest Russian car makers – AvtoVAZ (the Volzhsky Automobile Plant) and GAZ (the Gorky Automobile Plant) more than once stopped their assembly lines, and the production of cars dropped by 4 % in total. It is of interest to note a decline in the metallurgical machine-building sector (a 7.7 % reduction of output) which took place despite the fact that the Russian metals industry enters the stage of intensive modernization. The companies not fully satisfied with the quality level of the Russian equipment prefer to place orders for foreign products.
As predicted by experts, the Russian steel market will show a 3 or 5 % annual growth in the next two to three years. But it is not enough for the steel industry as this sector needs higher growth rates.
The Russian aluminum producers retained a high utilization rate thus providing for a 1.5 % build-up of primary metal output. The main part of the products (83 %) continues to go for export. Alongside it, it is worth noting that the Russian market is developing rather rapidly: The aluminum sales grew by more than 15 %, mainly due to the demand for rolled products.
The policy of curbing production by the biggest world companies, including Norilsk Nickel, led to the situation when in 2002 world production was 1,199,000 tons thus exceeding the demand only by 33,000 tons and brought about a rise of exchange prices. In Russia the production of nickel fell by 5.1 % in 2002. About 95 % was exported. Meantime the internal demand is still low.
In 2002 the growth of nonferrous metals rolled product output continued, reaching 11.7 % for aluminum, 5.6 % for titanium, and 5.1 % for copper. It is due to the going-on rise of the internal demand, above all, on the part of transport machine-builders who consume over one third of nonferrous metals. The construction industry showed a 10 – 20 % higher demand.
The results of 2002 show that the effect of the devaluation of the Russian national currency in 1998 which determined the metals industry development in the three following years has been fully exhausted. Now the main development factors became fluctuations on the world metals market.


In 2003 investments in the Russian economy are anticipated to increase which will undoubtedly improve the demand of metals. It is important for the steel companies to deliberately improve the structure of their exports. Special quality bars, hot and cold rolled coils, sections must occupy a more significant position in the export structure since the low-value (hot-end) products are unprofitable in the presentday market situation. 

N  O  W  :
	Despite experts’ anticipations, in 2003 the Russian metals industry shows a high growth pace evidenced by statistical data for the first months. For example, in February, 2003, as compared to the same month of 2002, the production figures grew by 7.6 % in the steel sector and 9.2 % in the nonferrous metals sector. An extra high growth was observed in the production of coated strip/sheet and tinplate as well as steel tubes/pipes, 36.7 and 16 %, respectively.