General director of Belarus'leading steel producer Byelorussian Steel Works(BMZ),Anatoly Savenok explained his company's abilities,investment plans and commented on the current and future market situation for SteelOrbis.
What is BMZ's production capacity and what are its main markets?
In terms of its production volume of industrial goods,Byelorussian Steel Works(BMZ)holds the leading position among enterprises in the Republic of Belarus.Implementation of advanced technologies,utilization of high-performance equipment along with the diligence of highly skilled specialists has allowed us to achieve good results at all manufacturing facilities:steel-melting,rolling,seamless pipe production,steel cord and wire production.For example,in 2011 our plant produced more than 2.6 million mt of liquid steel,about 2.2 million mt of rolled material,more than 110,000 mt of seamless steel pipes and over 400,000 mt of steel cord and wire of different specifications.It is very important to emphasize that we never stop at what has been accomplished:BMZ continuously develops its production facilities,improves its product quality and increases its production capacities.
Our products are used in construction,automotive,mechanical engineering,petroleum production and are successfully sold in markets such as Europe,Russia,the Middle East and Africa.For the period of its existence,our plant has supplied products to 109 countries around the world,which proves that the trade mark'BMZ'is well-known in the steel markets.
What share do export sales hold in BMZ's total sales?
Exporting is one of the most important aspects of our activity which influences the continuing development of BMZ.Export sales account for 80 percent of the total sales volume.Export distribution by region is as follows;Europe-48 percent,Russia-27.8 percent,the Middle East and Africa-16.6 percent,other CIS countries-3.4 percent,the Americas-3.5 percent,and Southeast Asia-0.69 percent.In 2012,we are expecting to increase our export shipments by about 108 percent as compared to 2011.The most interesting destinations for us from the point of view of logistics and delivery will remain the European and CIS countries.Moreover,the geography of supplies will also include such regions as Southeast Asia,as well as North and South America.It is possible that the share of shipments to slower markets,such as the Middle East and Africa,may be decreased.
In February,BMZ was one of the most competitive billet supplier in the CIS region.What is BMZ's advantage in pricing?
The competitive strength of BMZ is generally determined by the high quality of the products rather than by price.Owing to the quality and vast variety of its products,the plant is able to find its market niche and survive in a competitive environment.Exported goods need to meet the requirements of international standards and be certified by national systems of foreign countries.The mandatory requirement of the mentioned certifications is the establishment of a quality management system at the manufacturing plant,ensuring stability of the quality characteristics of the supplied product.Advanced quality control techniques based on statistic analysis results have to be implemented.In line with such requirements,BMZ started to implement ISO 9000 series international standards in 1993.Today,BMZ has more than 50 certificates of conformity for different types of products.
In addition,compared with its peers BMZ benefits from an advantageous geographical location and good logistics-given the developed transportation system between the European and Russian markets.Other competitive advantages include a stable position in the world market,the capability to manufacture a vast range of products,the implementation of an international quality management system,a good reputation among customers,and highly-skilled personnel.
What is your prediction for the billet price trend in the second quarter,given the current stable trend seen in scrap prices?
There have been no significant price fluctuations in the world billet markets since the economic crisis back in 2008.There are two limiting factors in the market:the prices for long products on the one hand and the prices of scrap on the other.We have to make our predictions for the billet market situation in Q2 considering the price level for rolled products in that period.At the moment,the main billet consumers in the Middle East and Europe complain that the price for semi-finished products is too high and so they are seeking price cuts.?The view is based on the fact that the price for finished long products in the mentioned regions is relatively stable.However,based on the current growth tendency for activity in the construction industry,we expect just a slight increase in demand for long products in Q2.Also,for a while now the price of scrap in the world market has been more or less stable,and in case of changes there has been a tendency towards increase in price,instead of towards decrease.
We know that some MENA countries are applying import duty on rebar,whereas billet is exempted from these restrictive measures in order to support the development of domestic industries.How does BMZ,as a producer of both billet and rebar,see demand in these markets currently and in the future?
We know that for rebar a five percent duty is imposed by GCC countries(Bahrain,Kuwait,Oman,Qatar,Saudi Arabia,United Arab Emirates)and a 2.5 percent duty is imposed for by Morocco.In any case,the imposition of the mentioned duties has not affected the sales of BMZ.The sales strategy of BMZ is aimed at maximizing profits from rebars sales.This is why at the beginning of this year we redirected our sales to regions with higher prices for rebars compared to the mentioned countries.If rebar prices in the MENA region increase again in the future,we would then reconsider the possibility of increasing the volume of supplies to this region.
What is the impact of the international banking sanctions against Iran,where billet imports have shown a significant drop in the past year,on the steel billet market?
The imposition of sanctions against Iran for services of international banks has resulted in a change of balance between demand and offers for steel products in the region:the volume of offers has remained at the same level but demand has dropped down.In consequence,the price for billets has decreased.At the same time,the strengthening of the euro against the US dollar in the first quarter this year helped make the price for billets in Europe more attractive than in the Middle East.This is why we,just like many other manufacturers,have redirected our sales to the European market.At the beginning of the year,the share of billets supplied by BMZ to the Middle East market constituted about 80 percent of our total volume of billet supplies.At present,this share has regressed to about 40 percent.Speaking about the Iranian market,I would like to point out that in 2010 the share of BMZ supplies to Iran from its total volume of sales was one percent,compared to 0.4 percent in 2011.In 2012,we do not supply material to Iran at all.
What challenges has BMZ been facing lately?
One of the main problems BMZ has faced recently has been the lack of transport facilities.The problem appeared when railcar fleets in Russia and in Ukraine were privatized.In order to resolve the problem,we signed an agreement with our scrap supplier Pskovvtormet in April 2011 for the purchase of 500 open-top wagons for transportation of scrap from Russia to Belarus and for transportation of BMZ steel products on the return journey.Also 500 open-top wagons were bought by BMZ Trading house.This railcar fleet will become the property of BMZ in a few years,according to the agreement.
A new logistics department was established in 2011 at our plant to arrange and manage transport operations.Within a short period of time,this department managed to arrange cooperation with owners of railcar fleets and railway administration authorities,and worked out logistic chains for raw material deliveries to the plant and for the export of the plant's products.
Are you planning any expansions or investments?
BMZ continuously carries out the modernization and reconstruction of its production facilities.In the past five years,BMZ has invested$600 million to achieve these goals.These investments will allow us to achieve our preset productivity targets,though we are still working for further improvements.According to BMZ's development plan for 2011-2015,our main target is to increase our liquid steel output to three million mt and to process all cast billets into finished products with high added value.Along with the increase of production volume,we are trying to reduce the negative influence of our operations on the environment.
As mentioned,our main target is to reach an annual steel output of three million mt.To achieve this target,we need to realize several important projects.We have already started the construction of a new limekiln,to satisfy our growing demand for quick lime.In the current year,we are going to modernize our electric arc furnace No.1,implementing an intensification of the steel melting process,renewing the hydraulic system,and replacing the frame and cantilevers.This modernization will allow us to increase the production capacity of the furnace up to one million mt.At the same time,we are going to reconstruct our dedusting and gas treatment plants No.1 and No.3,in order to improve the ecological situation around our enterprise,decreasing the loss of heat with combustion gases and ensuring complete burning ofСО.Up to 2015,the plant is going to invest€22 million within the scope of its ecological program.These expenses are justified for an enterprise which takes care of the area in which it operates.Zhlobin is a fast growing and developing town and we want our population to breath fresh air.?
To increase production of oil and gas pipes and improve their quality,we are carrying out a project for the construction of finishing line No.3 in one of our pipe rolling shops.
Regarding our steel cord and wire production,we should mention the reconstruction of the bead wire line in the steel cord and wire shop No.1,which will give us the opportunity to expand our product mix and manufacture new types of competitive products.The second significant project involves the purchase of machines for the manufacturing of SAW WIRE,designated for crystal cutting.
One of the most important projects scheduled for the period until 2015 is the construction of a new light-section rolling mill.It will have a production capacity of 700,000 mt per year,with the possibility of a further increase up to one million mt.The project is planned to be finished by 2014.
Much attention at BMZ is given to the attraction of foreign investments by means of establishment of joint ventures.We should mention here our joint venture'BMZ TUBULARS'for the finishing treatment of oil and gas pipes.Its establishment will allow manufacturing of high-technology products with higher added value as well as the development of new sales markets.
To ensure continuous delivery of technical gases,it was decided to establish a joint venture with one of the strategic partners of BMZ who will implement a project for the construction of a new air-separating plant.In the future,it will allow elimination of problems regarding deficiency of technical gases at BMZ,will help to reduce expenses for purchase of oxygen,and ensure the possibility of increasing the liquid steel production volume.
