Annual Report & Accounts 2012

Our business model

Sustainable development

Corporate responsibility is centre stage in our business model, being an integral element of each link in the value chain. NLMK encourages high standards of social welfare and environmental protection and prevents violations of human rights in the regions in which it operates.

Our corporate responsibility policy is geared to achieving sustainable development objectives that are aligned with the long-term economic interests of the Group. We strive to protect our employees, through improving their standard of living, and providing safe, secure working conditions. We care about ecology and minimize our impact on the environment. We create a positive social environment in the regions where we operate and support our local communities.

Our vertically integrated business model

NLMK has created a unique business model: steel production (the most material- and resource-intensive part of the metallurgical process) is concentrated in low-cost regions, while finished products are produced much closer to the Group’s client base. This allows NLMK to minimize expenditure on production and logistics while, at the same time, swiftly and flexibly adapting to the changing requirements of our end users. Vertical integration and effective oversight of production costs means that NLMK is one of the world’s lowest-cost producers of high-quality steel products.

1. Upstream

Our Russian assets fully supply the Group’s requirements for iron ore concentrate, sinter ore, and coke, and the majority of our scrap and energy needs. NLMK manages one of the most efficient iron ore manufacturers in the world, situated close to the Group’s main steel production facility, and with a reserve of around five billion tonnes.

Upstream

2. Midstream

NLMK has a flexible production chain. Approximately 20% of our steel is produced using Electric Arc Furnace (EAF-based) technology and 80% is manufactured using Basic Oxygen Furnaces (BOF) at one of the most economically run companies in the world: our site at Lipetsk. About 90% of our steelmaking capacity is located in Russia, next to our main sources of raw materials and close to key end users of our products.

Midstream

3. Downstream

Production and sale of our wide range of finished products is split evenly between developing and mature markets, thereby ensuring both growth and stability. A substantial part of finished product manufacturing is carried out by NLMK rolling mills close to our wide client base, which has strict requirements in terms of product quality and lead times.

Downstream

For more information on our corporate responsibility projects