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

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.