Annual report 2007 - Magnitogorsk Iron & Steel Works ...

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Main Trends in the Global Demand for Steel Products The global steel industry is developing at fast rates. According to the International Iron and Steel Institute (IISI), over the period of five consecutive years global steel production was growing faster than 7% per year, and in 2007 it reached 1.34 billion tons. Demand for steel also continues growing . In 2007 the world’s steel consumption increased almost 7% and reached 1.2 billion tons. The largest contribution to production is coming from the developing nations. Starting from 2001, the share of the BRIC (Brazil, Russia, India and China) countries in the global production increased from 31% to 48%. Although its production rates have slackened, China remains a leader having increased crude steel production by 15.7% to 489 m t in 2007. China is also a key player in exports supplying about 62 m t of steel products to the global markets in 2007, which is 45% higher than in 2006. Asia and Oceania 16.5% Middle East 1.2% Africa 1.4% North America 9.8% South America 1.1% CIS 3.9% Europe 17.9% Asia and Oceania 17.0% Middle East 1.2% Africa 1.5% North America 10.5% South America 1.2% CIS 3.9% Europe 18.8% Global Steel Production in 2007 India 4.0% Russia 5.4% BRIC countries 48.2% Global Steel Production in 200 India 4.0% Russia 5.7% BRIC countries 45.9% Brazil 2.5% Brazil 2.5% China 36.4% China 33.8% The general growth trend was also supported by the Russian market. The high level of demand for steel and increased prices for steel making raw materials pushed the steel prices up in early 2007. Demand for steel in Russia is growing fast: in 2007 steel products consumption increased by 19% and reached 40 m t. The high growth rate of the global and domestic markets is a key driver of the steel companies’ production growth. The Russian steel industry has been developing steadily boosting its production of finished rolled products more than 1.5 times over the last 10 years. In 2007 production increased by 2% and totaled 59.5 m t of rolled products.
The growing demand and buoyant prices inside Russia are prompting the Russian steel makers to shift their focus away from exports and build up their sales to the home market. . There is stronger pressure on the Russian market from CIS steel suppliers, with the share of steel imports to the Russian market growing still faster, from 11% in 2006 to 16% in 2007. Othes 23% Russian Rolled Products Market in 2007 Import15% ANNUAL REPORT OPEN JOINT-STOCK COMPANY MAGNITOGORSK IRON & STEEL WORKS ММК 16% Severstal 19% NLМК 8% Chelyabinsk МК 4% NТМК 6% Ural steel 3% ZSМК 6% Others17% Russian Rolled Products Market in 200 Import11% SEASON 2007 ММК 17% Severstal 22% NLМК 10% Chelyabinsk МК 5% NТМК 7% Ural steel 4% ZSМК 7% Main Consumers of MMK’s Steel Products In the domestic market the key sectoral consumers of OJSC MMK rolled products are pipe making plants, such as Trubnaya Metallurgicheskaya Kompaniya (Tube Metallurgical Company), the ChTPZ Group, the United Metallurgical Company, Russia’s leading automakers ( AvtoVAZ, GAZ, KamAZ), the largest Russian machinebuilding company Uralvagonzavod, the construction sector, VIZ-Steel, the largest Russian transformer steel producer, and MMK-Metiz. In 2007 Russia’s pipe production amounted to 8.8 m t which is 11% higher than in 2006. The growth of the Russian pipe industry is driven by the implementation of large-scale oil and gas projects and development of the construction industry. Russia is one of the world leaders in extraction, transportation and processing of hydrocarbons. Manufacturing of large-diameter pipes for pipelines is strategically important for the country. In 2007 car production in Russia grew by 10% compared to 2006, mainly because of an increase in production at the Russian-based plants of international automakers. In its turn, the car production growth is spurred by the population’s rising earnings and expansion of the consumer lending system. All these factors will generate a higher demand for high quality cold rolled products, primarily because major global car makers intend to set up production in Russia. 2007 saw a 20% growth in machine and equipment manufacturing. There has been a rise in production of machines and equipment used in housing and road construction, and also white goods largely attributable to expanded production at assembly plants. For example, over the period of 2005-2011 production of washing machines and refrigerators is expected to increase by over 6% annually. The development of the construction sector has had a positive effect on the consumption of long, flat, and coated products. While over the recent years the growth in the construction industry was at the level of 7.6% per year, in 2006 it jumped to 15.2%, and in 2007, as the Goskomstat data of shows, housing construction will grow an impressive 19.4%. The National Affordable Housing Project has become a powerful driver for the development of the construction sector which has led to a sharp increase in the consumption of water and gas pipes. The high growth rates of the major steel consuming industries provide a big potential for sales of MMK’s products in the Russian market.
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DISCLAIMER The present Annual Repor
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Victor Rashnikov, Chairman of the M
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Description Capitalization (as at y
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Content INTRODUCTORY ADDRESS of Vic
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In 2007 the Magnitogorsk Iron and S
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Page 23 and 24: Human Resources The average payroll
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Page 33 and 34: as regards the organization of thei
Page 35 and 36: Relations with Local Communities in
Page 43 and 44: • • • ANNUAL REPORT OPEN JOIN
Page 49 and 50: 10,000 8,000 6,000 4,000 2,000 0 AN
Page 51 and 52: 70 60 50 40 30 20 10 0 Assets Curre
Page 53 and 54: 4 3 2 1 0 Liquidity dynamics of MMK
Page 55 and 56: In accordance with its borrowing po
Page 59 and 60: 1.0 0.8 0.6 0.4 0.2 Trends in OJSC
Page 63: ANNUAL REPORT OPEN JOINT-STOCK COMP
Page 68 and 69: 8 Major Regional Markets for OJSC M
Page 70 and 71: 70 LLC Uralsibtrade OJSC Uraltrubpr
Page 72 and 73: 72 The changes in the domestic sale
Page 74 and 75: 7 Victor Kutischev, OJSC MMK’s Co
Page 76 and 77: 7 Overview of the Iron Ore and Coal
Page 85 and 86: • • Expenditures on major capit
Page 89 and 90: tons thanks to the installation of
Page 97 and 98: Currency Risk A significant portion
Page 101 and 102: Goals Planned value Actual value Ac
Page 105 and 106: The average wages at MMK are 35% hi
Page 109 and 110: # Causes of injuries 2003 200 200 2
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ANNUAL REPORT OPEN JOINT-STOCK COMP
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Environmental Expenditures 2007 saw
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6.00 5.16 5.00 4.00 3.00 2.00 1.00
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128 Exhaustive, precise and timely
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130 Report on Payment of Declared (
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132
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13 Information on Equity Capital As
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13 Liubov Gamper, OJSC MMK’s Dire
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138 Audit Committee Chairman of the
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1 0 # 5. 6. 7. Provisions of the Co
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1 2 # 18. 19. 20. 21. 22. 23. Provi
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1 # 31. 32. 33. 34. 35. 36. 37. Pro
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1 # 45. 46. 47. 48. Provisions of t
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1 8 # Provisions of the Code of Cor
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1 0 # 73. 74. 75. Provisions of the
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1 2 Director for Sales Director for
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1 Commercial Director Director for
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1 • • • • • • • •
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1 8 • • • • • • • •
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1 0 Protection Policy which regulat
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1 2 Sergey V. Krivoshchekov (born i
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1 - exercises the authorities of th
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1 Victor A. Kutischev (born in 1958
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1 8
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170
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172 1. Date of Publication of the L
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• settlement procedure - by insta
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24) Services Agreement # 150577 bet
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• • • validity period - till
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The following persons are recognize
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The following persons are recognize
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61) rental agreement # 152445 betwe
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• validity period - from the date
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days from the receipt of invoice;
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• • • settlement procedure -
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The Body which approved the transac
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• • • validity period - till
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• • • • ANNUAL REPORT OPEN
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• settlement procedure - funds tr
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164) paid service agreement # 16001
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There are no beneficiaries under th
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during the shipment, with a discoun
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• supply period - until next Annu
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CONSOLIDATED BALANCE SHEETS AS OF D
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Note Years ended December 31, 2007
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ASSETS I. NON-CURRENT ASSETS Line c
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LOSS AND PROFIT STATEMENT for 2007
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BREAKDOWN OF INDIVIDUAL PROFITS AND
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3.3 Reporting cycle Date of Publica
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EN10 Percentage and total volume of
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The OJSC MMK’s Annual Report is e
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