Mr.Dmitry Nikolaenko,sales director and member of the executive committee of Metinvest,shared his thoughts with SteelOrbis about Metinvest's acquisition of Zaporizhstal,about Metinvest's services and on the Turkish flat steel market in general.
Is it possible to give our readers a brief history of Metinvest and a short description of its current operations worldwide?
Metinvest is an international vertically-integrated steel and mining company owning assets in Ukraine,Europe and the United States and operating at each link of the production chain-from iron ore and coal mining and coke production through to semi-finished and finished steel production,including the manufacturing of plate and coil,pipes,shapes and bars and other value-added products.
According to Forbes Metinvest is the largest company in Ukraine,while it ranks fourth among the largest companies in central and eastern Europe according to the Deloitte TOP 500 based on 2012 results.Metinvest is one of the biggest CIS producers of iron ore raw materials and steel.The company is one of the top ten producers of carbon steel plates in the world.
Metinvest maintains relatively low production costs along with low-cost sea and rail transportation.The company exports a substantial portion of its steel products to over 1,000 customers located in more than 75 countries through its extensive international sales network which covers most of the key regions in the world.Metinvest has a successful history of cooperation with Turkish buyers,being among the major foreign suppliers of plate,HRC,CRC and semi-finished products to the Turkish market.
Metinvest has acquired a 50 percent stake in Industrial Group's mining and metal business Zaporizhstal Integrated Iron&Steel Works.Could you please share the details of this acquisition within the context of the group's long-term development strategy?
In several steps,Metinvest,jointly with a group of investors,became owner of 50.0032 percent of Zaporizhstal I&SW shares(Metinvest owns 49.0032 percent and the group of investors owns one percent)as well as becoming owner of shares in a number of other former Industrial Group companies in the mining and metals sector.Metinvest plans to complete consolidation of its controlling stake in the future.
Acquisition of these mining and metals assets is part of the long-term development strategy of the company,which is focused on establishing strong positions at every stage of the supply chain.We are aiming to increase the production of high-quality rolled steel and high added-value products in Ukraine.The first step of our policy is to improve the competitive ability of Zaporizhstal I&SW products.
The Turkish market is an important consumer of Zaporizhstal's flat products.How will the acquisition affect the Turkish market in your view?
The flat product segment is very competitive and the Turkish market is proof of this.We are aiming to operate efficiently in such an environment,to maintain the market share of Ukrainian flat products and try to increase it,offering more comfortable partnership conditions to clients.Metinvest's goal is to become a preferred foreign supplier for Turkish buyers of steel products.
Is it possible to give details of Metinvest's new sales and marketing organizations?What can Turkish customers expect from Metinvest after the acquisition in terms of new strategies and/or advantages?
There will be no changes in the general sales and marketing organization structure of Metinvest due to acquisition of the controlling stake in Zaporizhstal I&SW.Zaporizhstal I&SW products will be distributed to the Turkish market via its regional office located in Istanbul.Of course,this means certain changes for clients who are now welcomed to collaborate with Metinvest as regards purchases of Zaporizhstal I&SW material.
We place great value on relations with long-standing buyers of Zaporizhstal's material and are focused on maintaining and developing them.Metinvest not only guarantees the rigorous execution of contracts,but can also offer more attractive prices,which are possible now since we have cut out the long chain of intermediaries that Zaporizhstal had been using.Metinvest will pay special attention to Zaporizhstal's steel clients and aims to provide them with effective price decisions and technical support.Moreover,clients will now be able to choose an offer package consisting of HRC and CRC output from Zaporizhstal and Ilyich,as well as plate from Ilyich and Azovstal.
In the second quarter of 2012 Metinvest's crude steel production decreased by 7.5 percent to 3.29 million mt,while its crude steel output in the first six months of the year totaled 6.74 million mt,down 8.1 percent,both year on year.Should we expect an overall decrease in the 2012 crude steel production of Metinvest?Which developments can be indicated as the main reasons in this output decline?
Due to the unfavorable market situation in the first half of 2012,Metinvest had to bring some changes into its sales structure,based on the offer and demand balance in the steel and raw materials'sectors and on sales efficiency.As a result,the share of steel products has been decreased.
We observe that Metinvest,as a strong mining and steel producing group,continues to maintain the pace of its development and to invest in new strategies.Selling electric welded pipe from LTZ in Russia is one such example.Could you please give the details of this decision and what advantages will be provided to customers?
Metinvest is a dynamically developing company oriented on strengthening positions in the strategic market and with a strong customer focus.The cooperation program between Metinvest Group and LTZ is aimed at optimizing the distribution of LTZ products and improving customer service.Metinvest Eurasia,the wholesale and retail sales channel of Metinvest Group in the Russian Federation,has a wide network of 30 warehouses and steel product centers in the key steel-consuming regions of the country,which increases the availability of LTZ pipes for Russian buyers.In addition,Metinvest Eurasia is now able to offer the construction sector and metal fabricators an almost complete product range.
Slack demand has been observed in the Turkish flat steel market this summer.What do you expect from this market up to the end of the current year?Looking further ahead,is it possible to give a picture of the overall flat steel market in Turkey in 2013?
Compared with the depressed market conditions in other countries,Turkey demonstrated relatively high buying activity for flat products during the summer.We believe the Turkish market will be one of the markets which will perform well in 2013 taking into account the continuation of Turkish economic growth.However,there are some threats linked to economic stagnation in the European region,which is the main importer of Turkish flat products.
Are you satisfied with demand in CIS countries?In your view,which developments may affect demand for flat steels,and which industries or sectors seem more confident?
Demand for flat products in the CIS countries is quite satisfactory.We believe there will not be any dramatic changes before the end of the year.However,the supply-and demand balance is fairly dependent on the situation in key consuming regions since the CIS steel industry is oriented towards exports.
Which markets are lively for Metinvest currently and which markets can be considered to have growth potеntial?
Maintaining and developing volumes of sales to traditional clients both locally and abroad is among the priorities of Metinvest.But we are also open to emerging opportunities.For instance,right now the Gulf countries are showing comparatively good buying activity.
In 2011 the flat steel markets saw rapid movement in the early months of the year.In 2012,contrary to all predictions,we did not observe a similar movement.How do you see the situation in the overall flat steel market at the beginning of 2013?
From our point of view,in the first quarter of 2012 the market did register growth although at a lower speed as support from the Far East region,namely from China,was not so strong.We do not see any reasons to put aside the traditional scenario forecasting the upturn of buying activity amid the restocking process at the beginning of 2013.
For which products do you foresee most activity in the first quarter of 2013?
We are optimistic about the general market developments at the beginning of next year.However,taking into account pricing dynamics and the speed of response in the different market segments,the first upward movements may be registered for finished longs and square billet.?But,generally speaking,we believe that there will always be good demand for high value-added and niche products and we are focused on increasing the share of these products in Metinvest's sales structure.
