Andrei Karunos

Main mill-800 control desk

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fter many months of testing China’s largest producer of picture tubes, Shanghai Novel, has positively appraised the quality of hyperfine steel strip for magnetic screens that is made by the Russian Schelkovo Steel Works. Earlier, this small steel mill in the Moscow region has already become the main supplier of its products to magnet screen manufactures in Lithuania and Ukraine. Besides, it also ships them to the company Matino (Philips’ former subsidiary) of the Netherlands.
"Today, at the end of the third year of developing a unique metal production, we finally have a basis for signing new contracts with leading producers of picture tubes", says Sergei Gorbunkov, the mill’s general director.
As a producer oriented toward the science intensive sector, the Schelkovo Steel Works had a hard time with the start of Russia’s market reforms. In crisis conditions the special steel turned out to be uncalled for. Manufacturing of kinescopes in the post-Soviet space was discontinued and in 1997 the mill was found bankrupt.
The revival of the Schelkovo Steel Works started in 2000 after it joined the United Metallurgical Company (UMC). In a short period of time it managed to benefit from obvious advantages of being integrated in this metallurgical holding. The mill resumed production of cold-rolled high-precision steel strip. It again emerged in the market as a supplier of metal products for makers of electrical and lighting engineering items, metalware. Stable relations with consumers were established.
In 2002 the mill completed the first phase of reconstruction done in cooperation with UMC. Investments exceeded $3M. The modernization allowed not only to get back to making steel strip for shadow masks of picture tubes but to bring their production up to a fundamentally new level. In 2001 the monthly production volumes averaged 250 tons, they were between 600 and 700 tons in 2002 and reached 2,000 tons in 2003. Steel for shadow masks and magnetic screens, i.e. products that the enterprise was focused on, accounted for 10 %.

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The Schelkovo Steel Works has been in operation since 1949. Originally, it was set to produce dynamo sheet steel needed by enterprises of the electrical industry. In the eighties, because of the rapid development of color TV, the mill changed its specialization and started making cold-rolled precision steel strip with special physical and mechanical properties that is designed for manufacturing the key kinescope components, which are the shadow mask and magnetic screen. Of much importance were the mill’s convenient location (not far from Moscow, near leading scientific institutes and centers of the electronic industry) and its experience in making thin flat sections. In fact, a new enterprise was set up. Its base consisted of a quarto mill and complex of thermal treatment equipment purchased in Germany and Austria.

Winning market positions was not as fast as managers at the Schelkovo Steel Works hoped for. "We thought that it would take no more than a year and a half but in practice it took twice as long", admits Sergei Gorbunkov. In his words, there were additional problems connected to consumers’ production specifics. If, for example, just one of over a hundred parts composing a kinescope is changed, its complete step-by-step testing is required and it may run for up to a year and a half. The first phase of testing is to evaluate laboratory prototypes. In the second one the first pilot batch of 1,000 kinescopes is manufactured. Then, metal is provided for making experimental-industrial batch of 5,000 to 10,000 picture tubes. Finally, following technical auditing of producing enterprise a contract-signing procedure starts.
The Schelkovo Steel Works entered markets in 2002, when the quality of the enterprise’s products and its technical facilities were recognized as being in compliance with international standards and were confirmed by the TUV quality certificate.
These results were of critical importance for the Schelkovo Steel Works since its activity is connected to foreign markets for as much as 99 %.

General view of mill-800 production section

As far as the Russian market is concerned, by Gorbunkov’s estimates, it cannot be considered promising. The country’s only enterprise, the Voronezh Electron-Beam Tube Plant, which tries to manufacture picture tubes, totally depends on foreign financing. During 2003 the plant was trying to raise its production volume up to 10,000 tubes a month but it was in no way sufficient to ensure the profitability level. It is unlikely that another similar enterprise will be formed in Russia since for this purpose major investments, from $500M to $700M, are needed. What is more, as Gorbunkov believes, it does not make sense to do it: "According to our data, about 1.2 TV sets are produced in Russia today and the Voronezh Electron-Beam Tube Plant is designed for manufacturing 3.5 million kinescopes. So, it is much easier to reanimate this plant than to establish a new enterprise".
The market of picture tubes is subject to strong influence by plasma panels and other promising technologies. It is quite natural that kinescope producers are seeking to make them cheaper and are attempting to lower prices for materials. According to Gorbunkov, when setting its priorities for the next year, LG-Micron, Korea’s largest mask producer, put prices in the first place. The second place went to the following task: with the material quality index of 50 % to secure a 100 % quality index for its products. In this connection the company conducted in November a new testing of metal from the Schelkovo Steel Works.
The price/quality ratio has become a governing factor for Dutch producers of kinescopes as well.
The Schelkovo Steel Works intends to expand the area of its sales. "We are active in the European market and we have well-established relations with kinescope producers", says Sergei Gorbunkov. "We have requests in the North American market that are serious enough. So far it is too premature to talk about the South American market, although there are some certain developments there as well", he adds.
As the general director of the Schelkovo Steel Works notes, the planned annual volume of mask steel and steel for magnetic screens (from 17,000 to 18,000 tons) can be fully realized in the Chinese and European markets. That is why the mill’s managers believe that they will not actively get down to the South American market before the second phase of constructing production facilities is completed.

Finished products

The existing limited nature of the Schelkovo Steel Works’ productive capacity predetermines its special marketing strategy. "We should manufacture and sell the most expensive specialized products in the first place. This creates basis for further development", Sergei Gorbunkov points out.
Quotas and antidumping investigations that hurt many Russian steel producers do not affect the Schelkovo Steel Works. "We operate within the frameworks of agreements signed between Europe and Russia, between America and Russia", says the mill’s general director. "Ours is a specific steel. And although it comes under some indicators by the time of getting licensed, the dumping notion is not applied to our export shipments", he stresses.
In Gorbunkov’s words, the question of the second phase to construct the mill’s production facilities will be considered taking into account economic results that have already been achieved as well as prospects for developing production of hyperfine steel strip. He believes that in the nearest 10 to 12 years the mask steel and hyperfine steel strip will be in high demand but, later on, this demand may decline since the direction of electronics development is changing.
"The finest high-precision strips are the set target of our enterprise’s progress and we, of course, will keep it. But since the kinescope market is subject to fluctuations, we are also considering other directions of development, which may be called for by the market", notes the general director. First and foremost, it is a matter of producing the finest tin, which is not available in Russia so far. The Magnitogorsk Iron & Steel Works makes tin with the minimal thickness of 0.18 mm. However, the demand in the country is high for tin with thickness from 0.14 mm. In 2003 shipments of the finest tin to Russia amounted to about 70,000 tons. "Since it is close to our basic specialized products, this sector is of much interest and it is promising", believes Gorbunkov. In his words, this direction will let diversify production and will ensure the mill a higher economic stability.
The approximate date of the second phase of construction at the Schelkovo Steel Works is between 2006 to 2008. This will require investments of about $50M to $60M. Selecting sources of funds will depend on the enterprise’s economic profitability and evaluation of prospects.