Alexey Kushnarev, Managing Director of the Nizhny Tagil Iron & Steel Works (NTMK)

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Ì: What results your works begin the year with, what tells the situation in the markets where you are present?

– The dynamics is positive as compared to the last year which is considered the best since the 1998 year crisis. In Q1 our steel production grew by 76,000 t, rolled product output by 100,000 t. The growth tendency is maintained in Q2 as well.
A return came from the new facilities commissioned last year. CCM No.4 built with the assistance of Voest-Alpine declares itself excellently. It has been already fully paid back. The machine makes it possible to freely vary slab size, up to 2800 mm in width, nobody else is doing it in Russia. Half of the products goes to export, including West Europe, the USA – there is a queue literally. The only distressing thing is a feeling of incompleteness. We are selling semi-product instead of self-processing it. It must be noted that the slab market is stiff now. A price of US$450 to 470 per ton is unprecedented and I do not think it will fall this year as the price for iron ore and other kinds of raw materials remains high.
The situation in the rolled product markets can be described briefly: everything is eaten! It relates to all kinds of long products and structural products. While China scheduled to bring steel production to 322mt this year it failed to reduce world demand. We anticipate further increase of steel product consumption in Russia as well.

ÅÌ: Will new production facilities be put into operation at your works in 2005?

– The main challenge is to commission the lines and plants put on stream last year. Blast furnace No.6 is to be brought to full design capacity. Quality properties for particular steel grades must be perfected at CCM No.4. We put on stream a new press-and-rolling line in the wheel shop but did not manage to produce railway wheels of desired geometry in one go. After timeout the German representatives brought new ideas. As soon as an assurance appears that our products are fully in line with the requirements of Russian railways we shall begin to bring the line to a capacity point.
We launched a reconstruction of BF No.5 which is scheduled for commissioning in a year. It will be a full analog of BF No.6 – which is an absolutely proper solution in engineering as two identical units will bring cost reduction and easier maintenance.

ÅÌ: Your steelmaking operations are comparatively up-to-date. Will they be modernized?

– True our steelmaking operations comprising four basic oxygen furnaces, three ladle-furnaces (put on stream last year) and a vacuum degasser. But the 2003 year was the fortieth year since the basic oxygen shop was commissioned. It is obsolescent. That is why we face a radical reconstruction. And we are not only expecting it but for a year are sincerely working at this problem together with SMS Demag, Voest-Alpine and Moscow Gipromez. The target is to produce 5mt of steel per year in the BOS which will permit the open-hearth shop to be phased out. As of today the technical part of the program has been already prepared. I think we shall take decision on the reconstruction in the near future.
All four BOFs will have to be replaced along with the complex of facilities, and this job is to be fulfilled within two years without production shutdown by replacing two furnaces a year. The building structure will have to be reinforced because loads will be increased due to greater weight of equipment. Taking into account that some time will be spent on the conclusion of a contract, ordering and manufacture of equipment, the new production operations can be put on stream in 2008.
The development plans include a set-up of a casting-and-rolling module complete with an EAF - for flat products. It can be built at the site of the former open-hearth shop.

ÅÌ: Is it planned to increase the steelmaking capacity in consideration of a growing market demand and a reliable raw-material base of NTMK?

– As a matter of fact, the raw material of the works is sufficient. Due to EvrazHolding we have coal, and ore. Only we do not intend to build up steelmaking. Nowadays we make 5.5mt of crude steel, 3mt of basic oxygen and 2.1mt of open-hearth steel. These 2.1mt will have to be transferred to the BOS. It is necessary to shutdown the open-hearth operations. Not only ecology and economy but market also pushes us to do it.

ÅÌ: NTMK is well-known to be specialized in the production of transport metal. What new are you going to offer to railwaymen in the near future?

– In wheel production we are a little behind our main competitor – the Vyksa Steel Works (an enterprise of UMC). Railwaymen would like to obtain wheels of 360 hardness. We do not produce them. Meanwhile the Vyksa Steel Works has already implemented this technology and made about 100,000 t of such wheels.
Our plans involve the second stage of reconstruction of our wheel-and-tire shop which will in the long run permit the quality required by Russian Railroads (RZhD JSC) to be obtained. The reconstruction includes the replacement of reheating furnaces, modernization of heat treatment and installation of machine-tools for full-profile machining of wheels so that we shall be able to process not only 180,000 pcs. like today but 600,000 pcs., that is, the entire annual volume which we plan to reach. Here a line for final inspection of wheels with ultrasonic and magnetic particle flaw detection is envisaged as well. This reconstruction stage is scheduled to be completed in 2008.

ÅÌ: The management of RZhD proposes more and more high-flying plans, particularly, it intends to organize high-speed running in Russia. Is your works technically ready to take part in such projects?

– The organization of high-speed running is more connected with rails. We just like NKMK also incorporated into EvrazHolding have a strategy of developing rail-and-beam production – in fact, this is a united program within the framework of the company.
Today we make bulk-hardened rails of uniform hardness over the profile when RZhD and foreign consumers require differential properties – hard head and more ductile foot. Russia has not developed similar technologies.

ÅÌ: Your works is considered one of the pioneers introducing IT systems in management practice. How is the information structure of the works being developed?

– Our operation is ensured by, I would say, Russia’s most powerful (and, maybe, not only Russia’s) multi-functional system. Today we monitor the current production activity by managing stock, production cycle, material flows, that is, we track real-time prime cost variations. This year we introduced a dynamic production control system based on SAP R/3. It makes it possible to vary a production schedule depending on consumers’ orders, productive capacity excess, stock volume. The computer will calculate an optimal variant and output a maximally cost-effective result. For the time being, the works’ personnel – production department, economists, marketers – are mastering the system. It is totally new, and something must be tuned. But it is already clear that we have another powerful managing tool that promises a good effect.

ÅÌ: For many years the peculiar symbol of Nizhny Tagil has been a plume of multicolored fumes. When can a qualitative improvement of the ecological situation take place?

– We realize our responsibility and carry on an active ecological policy. The results are demonstrated by dynamics of reducing air emissions of pollutants. While in 1994 their volume was 244,000 t last year it amounted to 104,000 t and by 2009 we intend to reduce it to 40,000 t. Nizhny Tagil has already left the list of the most polluted cities in this country. However, we would like the citizens feel that they do not any longer run an ecological risk.
We are under steady watch by stiff public control. There is a powerful ecological movement in the Sverdlovsk Region. Apart from this outside influence, we have our own monitoring system including charges on ecological violations.
Mind that NTMK was the first in the Russian steel industry to be certified according to ISO 14001. Prior than others we became engaged in recycling of industrial waste. Each year we generate 2.5mt of slag and process 4.6mt. In other words, waste disposal areas are gradually decreased. The output of processing is crushed aggregate for construction. But the value of the industrial waste is higher because it is a vanadium-bearing slag, and at a price of US$76 per ton of V, it is economically feasible to set up vanadium production. EvrazHolding has set this problem. Now we are selecting a technology.

ÅÌ: What is your attitude to statements that the only task of a metal-producing plant is to make products and it must be released from anything else?

– Restructuring seems to be self-evident. The 2005 year will pass under the token of optimization of quantity. The whole number of non-core services will have to be taken out of the works’ balance – automobile operating department, construction-and-repair service, refractories shop, catering plant, etc. As illustrated by restructuring practice of other plants, these links can be fully transformed into subsidiaries or free-standing businesses following which they begin to operate in the public market quite effectively. The managers of our departments still fear such self-dependence. Being new to this, it is hard for them to dive into economy, count costs, seek profit contributors. However it turns out that alternatives can be found once the ice is broken.