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Annual Report & Accounts 2012

Strategy in action

How we do it:

Develop extraction and production; reduce consumption of potentially limited raw materials for which integration is absent or incomplete.

The viability of integration is defined on the basis of criteria for maximizing economic impact and reducing the risks of loss of raw material security.

What we said we would do in 2012:

Begin construction of our own facilities to produce iron ore pellets in order to reduce dependency on external purchases.

Continue to develop the Vtorchermet NLMK scrap-collecting base in order to supply, in a sustainable manner, the steelmaking facilities of the Group’s Russian assets with our own scrap.

What we did in 2012:

Improved technologies for coke and chemical production to enable cheaper grades of coal to be used.

Expanded capacity for the collection of scrap in order to increase the level of self-sufficiency in scrap ferrous metals.

Expanded capacity for the production of lime in order to satisfy the Company’s increasing demand due to the growth in steelmaking capacity.

What we plan to do in 2013:

To continue to build our own facilities to produce iron ore pellets in order to reduce dependency on external purchases.

To further develop our scrap-collecting base.

To improve and optimize initial processing stages (coke and chemical and blast furnace production) with the aim of incorporating cheaper raw materials.

KPIs:

Self-sufficiency in iron ore > 100% (after construction of the Pelletizing Plant).

High level of self-sufficiency in scrap metal: 85% in 2012.

Risks:

Risk of a reduction in the price of raw materials linked to the expected increase in extraction capabilities across the world as a result of investment projects, both planned and underway, being implemented by major raw materials suppliers.

Risks linked to inflation in operating costs.

Risks linked to infrastructure limitations.

Risks linked to the implementation of investment projects.

Key projects

 

Cutting costs through resource-efficiency

Coal consumption trends at Novolipetsk (mt)
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At Novolipetsk blast furnace operations, construction is under way of a pulverized coal injection unit at blast furnaces #3–5. In 2013, a pulverized coal injection unit with a capacity of approximately 2.6 mt/y of pig iron (or about 20% of the entire Novolipetsk capacity) is scheduled for commissioning at BF-5. There is a plan in place to gradually assimilate this technology and to apply it to blast furnaces # 3, 4, 6, and 7.

It is expected that the introduction of this technology will in future allow the site to reduce its consumption of natural gas and coke when producing pig iron, due to the injection of lower grade, steam coal into the blast furnaces.

Project parameters:

Capacity:

To be confirmed

Launch date:

2013

Capex*:

RUB 3,747 m (US$ 117 m)**

Capex allocated by the end of 2012: RUB 2,710 m (US$ 85 m)**

20-30% reduction in specific coke consumption

70-80% reduction in specific natural gas consumption

* Construction cost design parameters, total cost of BF# 3-5 PCI

** Including VAT

For more information on our responsible use of resources

30% capacity expansion at Stoilensky

Increased iron ore concentrate and pellet capacity (mt)
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Capacity expansion at Stoilensky

As part of a strategy to strengthen the cost-effective integration of its major raw material, the Company is undertaking a large-scale development programme at Stoilensky to meet the Group’s total demand for high quality iron ore, including pellets and iron ore concentrate.

Key to this programme is the construction of a Pelletizing Plant with a capacity of 6 mt/y. The project began in 2012.

Furthermore, in order to guarantee the necessary supply of raw materials to the plant, parts of its infrastructure are to be improved:

A 30% increase in mined ore, up to 42 mt/y, by extending the open pit area.

The construction of Section 5 of the Beneficiation Plant to increase production of iron ore concentrate by 30% from 14 mt/y to 18 mt/y.

The construction of fine and medium crushing facilities, together with other infrastructure.

Project parameters:

Capacity:

42 mt/y of ore (+30%)

18 mt/y of iron ore concentrate (+30%)

6 mt/y of pellets

Launch date:

To be confirmed

Capex:

To be confirmed

100% self-sufficiency in iron ore

For more information on NLMK Russia Raw Materials operating performance