Metallurgist, Vol. 43, Nos. 3-4, 1999

T H E S T A T E O F F E R R O A L L O Y S P R O D U C T I O N

IN R US S IA

V. M. Nekrasov

The Technical-Economic Council of the Russian Ministry of Economics met on March 3, 1999 with the agenda of "The

State of the Ferroalloys Subsector and Development of the Internal and External Markets." The meeting involved the partici-

pation of leaders in the Russian ferroalloys industry, representatives of ferroailoy manufacturers, the Central Scientific Research

Institute of Ferrous Metallurgy (TsNIIchermet), the Ural Institute of Metals, the company "Ferrosplav," and specialists from the

Department of Economics of the Metallurgical Sector of the Ministry of Economics.

The meeting was led by the head of that department, A. Z. Shevtsov. In his opening remarks, he briefly characterized

the status of the metallurgical industry, acknowledging the problems that have arisen in connection with the anti-dumping mea-

sures directed against Russian metallurgical products by several nations.

The featured speaker was N. P. Skryabin, head of the division of the Ministry of Economics which includes the given

department. He noted that the volume of ferroalloys production in Russia increased 6.7% from 1997 to 1988. However, the

decline in steel production in the country is necessarily reducing the demand for ferroalloys and thus cutting back the produc-

tion of these materials.

Four plants in the subsector produce 80-85% of all of the ferroalloys made by Russian industry. The Serov Ferroalloys

Plant, Chelyabinsk Electrometallurgical Combine, and Kosaya Gora Metallurgical Plant have successfully introduced a tech-

nology for the production of silicomanganese and increased their ferromanganese production capacity, which has made it pos-

sible to curtail imports of these ferroalloys.

Sixty-five percent of the ferroalloys consumed in Russia in 1998 were produced by Russian industry, while the rest was

imported almost entirely from the nations of the CIS (Commonwealth of Independent States). Of the latter amount, about 89%

came from the Ukraine. More than 85% of the imports were manganese ferroalloys. Ferroalloy plants sold roughly 43% of

their products in the external market in 1998, and of this amount 96% were exported beyond the CIS.

The status of the raw-materials base of the ferroalloys subsector is causing considerable unease, especially in regard to

the reserves of manganese and chromium ores. Mining the available deposits could make it possible to organize the production

of manganese ferroalloys in Russia and significantly reduce the dependence on imports. This is reflected in the special federal

program "Ore," which has yet to be really implemented because of a lack of investments.

Government financing of the metallurgical industry has almost completely dried up in recent years. However, facto-

ries that are leading in the effort to rebuild the industry can obtain government financial support by participating in the compe-

tition being held for investment plans, as well as the competition for government guarantees. Government loans to shore up cur-

rent assets may become available in the near future.

Many of those who spoke at the meeting mentioned the problems which exist in the external and internal markets for

ferroalloys. For example, S. N. Sokoiov, General Director of the Serov Ferroalloys Plant, noted that world prices for fer-

rochromium have fallen by almost 40%. The drop has been due mainly to the financial crisis in Southeast Asia and to the large

quantities of ferroalloys from Kazakhstan. This has made their export less profitable. The high costs of the raw materials and

rail transportation are increasing the prices for Russian ferroalloys and making them less competitive.

Present ore-recovery capacity is extremely low, and tenders that have been held to encourage the development of new

fields have been unsuccessful. The winners tend to be companies that do not have the money to exploit the deposits and do not

actually develop the field. This is the biggest problem with the organization of such tenders. S. N. Sokolov once again empha-

sized that the lack of investment is making it impossible to mine domestic deposits of manganese ore, thus making Russian met-

Minislry of Economics of the Russian Federation. Translated from Metallurg, No. 4, pp. 3 4 , April, 1999.

0026-0894/99/0304-0151 $22.00 �9 1999 Kluwer Academic/Plenum Publishers 151

allurgy largely dependent on Ukraine for this raw material. Thus, it is necessary for the government to begin regulating the

prices of the products sold by the natural monopolies, to help combat anti-dumping practices, and to help in other areas as well.

The same problems were discussed by V. N. Kornoukhov, Director of Production Operations at the Chelyabinsk

Metallurgical Combine. Kornoukhov noted that ferroalloys production at the combine declined from the 1997 level because of

idling of the furnaces due to the high costs of electric power. The conflict with the power companies has since been resolved

and all furnaces are now again in working condition. The main types of ferroalloys are being produced in volumes sufficient to

satisfy contractual obligations. Kornoukhov also spoke about the need to solve problems related to the availability of raw mate-

rials for the production of ferrochromium and ferromanganese, the high costs of those materials, and high railroad freight rates.

The need for government subsidies to protect domestic industries was also mentioned.

S. S. Zhilyakov (of the firm "Kuznetsk Ferrolloys") and A. M. Lobych (Alpaevsk Metallurgical Plant) gave their views

on problems connected with the entry of cheaper Ukrainian ferroalloys into the Russian market and the need to be alert to

anti-dumping measures.

L. M. Mityanin (Chusovo Metallurgical Plant) and V. N. Chirkov ("Vanadium-Tulachermet" Company) talked about

the unprofitability of exporting vanadium products and the shrinkage of the internal market. Also, in accordance with a

Resolution issued by the Russian Federation Government on February 25, 1999, customs duties are being levied on vanadium

pentoxide. This action will have the effect of reducing its export, thus resulting in a loss of income for the government as well

as manufacturers and a cutback in production.

Scientific research in the area of ferroalloys production and cooperative programs being conducted with manufacturers

were discussed by V. A. Rovnushkin (Ural Institute of Metals) and S. E. Lazutkin (TsNIIchermet).

G. V. Serov (of the firm "Ferroalloy") proposed creating an association of ferroalloy producers that might coordinate

the operations of the different plants.

G. A. Shamanov, Deputy Director of the Department of Economics of the Metallurgical Sector, agreed that all of the

problems raised by the participants in the meeting were important. At the same time, he observed that there had been no dis-

cussion of the economic aspects of ferroalloys production (costs, pricing) or the need for closer cooperation between research

organizations and factories in the sector.

The meeting ended with a resolution which noted that ferroalloys sector needs the help of the Department of Economics

of the Metallurgical Sector in attracting investments, adjusting freight rates in concert with the Russian Ministry of Railroads,

dealing with anti-dumping measures, and other important matters.

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