Annual Report 2011 - Magnitogorsk Iron & Steel Works ...

2011 /
ANNUAL REPORT
About Us Sales Markets
Finances
Risks
Social Sphere
Management
Information
Diversification into New Products Cost Reduction
2,000 mm Cold Rolling Complex
Parsytec
Project highlights
Continuous HD galvanizing line
Parsytec, Ra
Parsytec, Ra
• State-of-the-art equipment by SMS Demag AG, Germany
• Capacity: 2 mtpy
• Products: Premium quality cold rolled and galvanized steel sheet
• Start of production: 2011
• Full design capacity to reached in 2012
• Total project cost: USD 1.5 bn
The new 2 mtpy cold rolling complex will produce premium quality cold rolled and galvanized sheet,
including from high strength steel, for the automotive sector.
The first stage of the complex, comprising a tandem mill with a pickling line, was launched in July 2011.
The 2nd stage is scheduled to come on stream in the summer of 2012.
Once the 2,000 mm Mill reaches full capacity in 2012, we estimate our products will account for about
40 % of the Russian automotive steel market. Though we set our sights on a more ambitious goal of
50 % market share. We are now in the process of having our products tested and certified by potential
customers. Upon completion of this process, we will supply cold rolled products to our subsidiary
Intercos-IV in St. Petersburg, which will process the steel into stamped parts and ship them to domestic
and foreign auto makers working in Russia. In October 2011, Ford completed a comprehensive audit of
our production facilities.
By mid-2013 MMK plans to start shipping products to all major auto makers active in Russia.
Improving efficiency through cost reduction has always been a priority for MMK, with special cost cutting
measures developed and implemented on an annual basis. In 2011 various organizational and technical
measures yielded savings of USD 177 million, including:
• USD 88 million, through reduced consumption of raw materials and other inputs;
• USD 68 million, through reduced costs for industrial services;
• USD 21 million, through reduced consumption of auxiliary materials.
Portion of fixed costs in MMK’s
production costs (%)
MMK Group’s 2011 cost structure (%)
Iron ore
Coal
Scrap
Ferro alloys
Electric power
Natural gas
Salaries and
administration costs
Other costs
The new 2012 cost reduction programme being implemented aims to achieve savings of USD 160 million.
14 15
700
600
500
400
300
200
100
0
350
300
250
200
150
100
50
0
Platts (right axis)
287
62
Prices for iron ore materials according
to Platts index and slab cash cost (USD)
323
62
362 362
124
* Premium Peak Downs HCC (price basis - fob Australia)
71
450
110
495 490
Prices for coking coal*
and coal concentrate cash cost (USD)
coal price benchmark (right axis)
163
102
459
131
200
150
100
400
300
250
200
150
100
50
0
50