Urals | Industry, manufacturing | Technology & innovation

NLMK, one step ahead, forks out another $40m

4 May '11
Oleg Kouzbit, Online News Managing Editor

Novolipetsk Steel, Russia’s third largest steel maker, is putting up $40m to renovate a production line at its Ekaterinburg-based VIZ-Stal. Since 2006 NLMK has spent $360m on making its regional production facilities more efficient and more innovative. Now a $25bn global major, NLMK’s continuing investment program is generating more than sales—its profit last year was $1.2bn and shareholders were rewarded with a dividend payout of almost $400m.

Novolipetsk Steel, a multi-national Russian metallurgical company, has announced $40m worth of upgrades at its Ekaterinburg-based subsidiary, VIZ-Stal, Russia’s second largest producer of electric steel. The Urals asset is reportedly modernizing its AEIP-8 steel strip electric insulation unit.

The company

Set up in 1934, Novolipetsk Steel (LSE: NLMK) is now one of Russia’s top-3 steel manufacturers with business interests in the CIS, Western Europe and the United States. The $24.2bn NLMK group employs about 70,000 people and consists of steelmaking, coking coal, chemical and mining segments.

Based in the city of Lipetsk, the holding develops a number of Russia’s key iron ore fields, including those located at the neighboring Kursk Magnetic Anomaly. Its Belgorod’s Stoilensky mining company is the RF’s third largest iron ore producer and gets most of its raw material from the Anomaly and another deposit, Donetsk Coal Basin just 500km south.

Russia’s wealthiest man

Russia’s wealthiest man (according to Forbes) and NLMK chairman Vladimir Lisin owns almost 90% of NLMK. The rest is held by company management and board members. The stock is publicly traded. Last year the group had sales of a reported $8.4bn and a net profit of $1.2bn. The firm has plans to pay about $390m in 2010 dividends.

Its Urals-based asset, VIZ-Stal, is a domestic leader in cold-rolled electric and transformer steel making with a capacity of more than 200,000 tons of products a year.

New equipment, new technology

According to NLMK, new equipment for the AEIP-8 insulation unit will be supplied from Germany and installed by its manufacturer, LOI. In 2013 the unit is scheduled for a restart. As a result of the investment the unit’s capacity is expected to increase more than 1.5 times and reduce electricity consumption by 30%.

AEIP-8 will also be VIZ-Stal’s first unit at its cold rolling mill to employ a new technology using natural gas to heat a steel strip instead of electricity.

Investing in its future

Novolipetsk Steel has been actively investing in its assets beyond the Urals. Its most recent plans cover coal mining and the development of Siberian fields, including Zhernovskoye outside Kemerovo. The firm is expected to invest another $40+m to tap into its huge 250 million ton proven B+C1 coal reserves.

The company’s key focus, however, is steel-making. It acquired its first Ural asset, VIZ-Stal, back in 2006. It inherited a lot of obsolete equipment, some from as far back as the early post-Soviet times.

Since then, the firm has spent an estimated $360m on technical upgrades and technological renovation for VIZ and its other regional asset in the town of Berezovsky, NLMK-Sort.

Last year NLMK reported about $40m worth of upgrades in the entire Ural region. For this year a $55m renovation program has been announced at VIZ-Stal alone. The group is bringing in new technology that will enable its Ekaterinburg subsidiary to start making a new product—high-permeability steel grades, with a capacity of up to 70,000 tons a year.
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