Annual Report 2010 - Magnitogorsk Iron & Steel Works

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionGRAPH 6,000 tonnes10 0005 000Growth rate in Russian pipe-making sectorProduction growth+33%2009 2010Pipe imports Russian made pipe sconsumptionPipe exportRussian pipe productionPipe consumption in RussiaThus, in 2010 the Russian pipe sector recovered topre-crisis levels of consumption, and continuedtogrow due to ongoing large-scale projects for gasdelivery to Europe. Growing oil prices are alsoincreasing demand and prices for Russian pipemakingindustry products.Machine BuildingConsumption growth+63%Russian railway car building demonstrated growthin 2010. Russian plants manufactured 47,900 railwaycars, which is twice the level of 2009. On average,rolling stock manufacturing capacity was utilized atthe level of 85%-95%.According to National Railways Company (RZhD), theaverage wear for Russian rolling stock is about 70%,which has created a significant shortage of railcarsand forced railways to use equipment beyond itsrecommended service life as the volume of railwaytransportation has steadily grown over the last fouryears.Currently the railway car building industry iswitnessing one of the highest growth rates in theRussian industrial sector.The steps taken by the government to stimulatedemand for cars in Russia have had the intendedeffect. The vigorous recovery of the market resultedin an overall growth in car sales for all types ofautomobiles, reaching 2.08 million new units sold,an increase of 33% vs. 2009. GRAPH 7Production of cars per 1,000 people80706050403020 ChinaRussia10India00 10 20 30 40 50GDP per capita, USD '000Construction SectorFor the first time in the last decade, in 2009the Russian construction sector experienced asignificant slowdown. A recovery began in 2010,primarily due to projects backed or financed by thegovernment. According to preliminary estimates,construction of housing will not exceed 2009levels, and will equal approximately 59 million sqm. The value of construction work performed inRussiain January-October 2010 totalled RUB 3.6trillion, 0.4% higher than in 2009. The housingsegment is seen as the most promising in the shortterm.OutlookProduction of carsper 1,000 people in 2010JapanGermanyGRAPH 7USAAccording to 2011 forecasts, the steel sector will beone of the fastest-growing Russian industries.The Russian automotive sector achieved 93.7%growth, producing 1.4 million vehicles in 2010,compared to 0.7 million in 2009.Steel & Style , 10 MMK ANNUAL REPORT 35