Русский язык English language Deutsch Français El idioma español 中文
Home page  / News & Analysis  / Latest news  / Ural nickel plants are threatened to be turned into museums
Select: Русский язык English language Deutsch Français El idioma español

Ural nickel plants are threatened to be turned into museums

Ural nickel plants are threatened to be turned into museums

20.01.2012 — Analysis

The Sverdlovsk regional government is working out a plan for upgrading the nickel industry. Having combined mineral and processing companies into an industrial cluster, the officials believe that they will be able to use private capital and advanced technologies to embark on manufacturing of high value-added products. Talking with the RusBusinessNews columnist, experts strongly criticized these plans, arguing that nickel-producing enterprises can be upgraded only through construction of production facilities and heavy investment, which will take a lot of time, meaning that investors will be able to commence a technological revolution only in the distant future. This, in its turn, means that nickel plants of the Urals are going to face tense times in the context of instability on the raw materials markets.

The plan conceived by the Sverdlovsk officials suggests giving up pyrometallurgical methods of producing nickel and its alloys at enterprises of the Middle and South Urals, thus putting the underused resources into circulation and decrease substantially the production costs. Due to high production costs caused by the obsolete technology, owners have to close down their nickel plants. The Rezhnickel enterprise operating in the Sverdlovsk Region has shut down its production eleven times over the last 20 years. The last shut-down was in the previous autumn: The losses of the enterprises for 2011 amounted to several million rubles. The owner (the Industrial and Metallurgical Holding-Management Company, LLC owned by Boris Zubitsky) arrived at the decision to lay off 800 employees and to blow down the furnaces. It will be a tangible loss for a small town like Rezh; therefore, the Sverdlovsk regional government offered the owner to come up with another decision.

However, it turned out almost impossible. Rezhnickel, CJSC started operating in 1936, and, according to the experts, the technology has never been changed substantially. The pyrometallurgical method of nickel production is very power-consuming: The intermediate product must be heated in furnaces three times and then blasted with oxygen in the converter. Furthermore, nickel production requires coke, the prices for which are increasing steadily. The related expenses account for almost three quarters in the production cost, which, most likely, impelled the Industrial and Metallurgical Holding Company, which is a member of the Coke Group, to acquire Rezhnickel.

Having purchased the plant and having integrated it, together with Ufaleynickel, OJSC, into the processing chain (both Ufaleynickel and Rezhnickel are owned by B. Zubitsky), the owner was able to find his niche on the world market, supplying low-purity nickel and stainless steel. However, the outdated technology meant the non-competitive price that would remained above 20 US dollars a kilogram. Therefore, when the prices for metal went down to 18 US dollars on the London Stock Exchange, Rezhnickel started building up losses. Previously, the problem could be solved very easily: Blast furnaces were suspended until the market situation changed for the better. This time, on the eve of the December election to the RF State Duma, the government authorities turned down the downsizing tactics, and the owner decided to get rid of the problem-causing asset.

The Sverdlovsk regional government expected that the largest metallurgical companies and the Ural Industrial - Ural Polar State Corporation might become potential buyers; however, eventually, the plant was sold to the HIGHMETALS KDS trader. Alexander Petrov, the regional minister of industry and science, informed that the government is willing to work with the new investor. The government authorities intend to get it involved in development of the industrial cluster, which is expected to combine users of mineral resources, scientists and producers in a new process chain. The officials expect that replacement of the pyrometallurgical method by the hydrometallurgical method and the further processing of solutions at the facilities of the Ural Electrochemical Integrated Plant, OJSC will result in production of high-added value nickel and reduce production costs.

Dmitry Baskov, a cofounder of Urals Nickel, LLC - the enterprise that was launched for production of nickel solutions, says that hydro-metallurgy is much more profitable than pyro-metallurgy: Due to application of the in-situ leaching method and electrolysis, the production cost of nickel goes down to 7 US dollars a kilogram. Taking into account that most of the world's ores are oxidized, this method of nickel production has good prospects. D. Baskov thinks that the new technology should have been used 10 years ago, as its deployment will take at least 5 years. At the moment, the technology has been checked only through laboratory tests - large-scale tests are necessary to justify construction of pilot production facilities. The Rezhnickel owners will have to launch a new plant almost from scratch; however, if they do not do this now, in the near future, according to the expert, they will be left with a metallurgical museum instead of a plant.

In the meantime, the meeting held by the Sverdlovsk regional government demonstrated that HIGHMETALS KDS has mid-term plans for fundamental upgrading of Rezhnickel. Alexander Timofeyev, a businessman, stated that the company initially intends to invest 400 million US dollars in comprehensive reconstruction of production facilities at the Serov nickel deposit and to renovate completely the processing factory with leaching cells. During implementation of this project Rezhnickel will continue using the old technology to produce N-3 grade nickel: A. Timofeyev is sure that in April 2012 the market situation will be favorable to put the suspended furnaces back into operation.

The experts suspect that the new owner has no funds for modernization of Rezhnickel. At the meeting with the regional government the representative of HIGHMETALS KDS noted that the company counts on the support of the well-known world trader - Glencore International plc - that will help it to upgrade the plant. Funds are also expected from cobalt production that is planned at Ufaleynickel (also sold by B. Zubitsky) that has adequate facilities.

After Norilsk Nickel, OJSC, has signed a long-term contract for supply of almost all produced cobalt and cobalt concentrate to the American OM Group, Russia experiences severe shortage of this strategic metal. The heavy investment of the government in aviation and missile engineering, according to the experts, will allow HIGHMETALS KDS to earn handsome profits on cobalt. However, the question is whether Rezhnickel will be able to survive into the time when the cobalt money is invested in upgrading of its production.

The fact is that in November 2011, the TVEL Fuel Company controlled by the state-owned Rosatom Corporation announced that it, jointly with Rusnano, OJSC is thinking over investment of 700 million rubles in Urals Nickel. The transaction can take effect within two-three years. The TVEL executive managers think that the new production launched in the Sverdlovsk Region will result in high-added value nickel that will be sold at very attractive prices. The Ural Electrochemical Integrated Plant has sufficient capacity to turn large volumes of solutions supplied by Urals Nickel, LLC into nano-structural nickel powder. In five years the partners intend to produce up to 20 thousand tons of nickel a year.

Obviously, Rezhnickel modernization will no longer be on the agenda with such levels of output. All the efforts of the Sverdlovsk regional government aimed at establishment of a cluster and revival of the main employer of the town will be wasted.

Vladimir Terletsky

Regions Project participants Investment projects Consulates and Trade Offices News and Analysis About the Project
«Sum of technologies»®
Web design
Site promotion