How can the Russian metallurgy be alloyed?
17.01.2011 — Analysis
Analysts expect that the natural and man-induced disasters that took place on the eve of 2011 will result in deficit of coking coal and increased prices for raw materials. In the meantime, the world economy is going to face a new turmoil caused by high inflation in China. The slowing down of growth rates in the Celestial country will result in a slump of quotations at trading marketplaces. Thereby, the leading metallurgical companies are switching over to fundamentally new - cheaper types of steel. As the "RusBusinessNews" columnist has found it out, Russia also has similar innovations, but nobody needs them, as metallurgists express no interest in finding a consensus between the price and quality of the their products.
The Deutsche Bank's analysts expect that the Christmas flood in Australia will affect the market, generating a shortage of coking coal, which will reach 18 million tons (about 8% of the world consumption). The gap could be closed by Russian producer companies; however, they are having bad luck going through man-induced adversities: the Raspadskaya mine (Evraz Group) is still under reconstruction after the May 2010 explosion, and in December the export-focused Neryungrinskaya Enrichment Factory (owned by Mechel OJSC) was hit by partial collapse of the equipment.
The Mechel managers are reserved in their comment whether the accident will cause wrecking of export contracts. Ekaterina Videman, head of the company's PR, informed "RusBusinessNews" that at present the regular mode of operation is being maintained only for the process flow of power generating coal that is shipped to consumers without delay. The coking coal preparation line is not operating: at the moment, there are experts working at the factory, and they will say when the production facilities will be back on track. However, today it is clear that Russian producer companies will try to capitalize on prices, taking advantage of the situation. On the world market the price for coking coal already jumped almost by 13%, and the Deutsche Bank anticipates that it will keep increasing.
The natural and man-induced disasters came as bad news for metallurgical companies that seem to have exhausted all their possibilities to increase prices. During the New Year holidays, the dollar gained weight, and prices for metals and oil started going down: investors fear a new wave of crisis in Europe as well as inflation and economic slowdown in China. The experts of the International Energy Agency avow that "oil prices have reached the critical level for the global economy". Their further increase will result in stagnation of production and slump in demand for raw materials. All the above said is also true concerning metals.
The main Russian taxpayer - Gazprom OJSC, while losing one market after another in Europe, turned its attention to Asia. Alexei Miller, Chairperson of the corporate board, has recently informed that Gazprom is shifting the center of its investment activity to eastern regions of Russia where infrastructure has to be developed actually from scratch. The ambitious scale of developments has brought up the top priority issue about reduction of expenses on purchasing of pipes and logistics. According to the Information Department of Gazprom OJSC, the services and divisions have been given the assignment to prepare proposals for optimization of investment in pipe products. It means that metallurgists will find themselves between the devil and the deep blue sea - soaring prices for raw materials and dropping quotations for the end products - especially those of them who do not have their own deposits of coking coal. Therefore, the issue of production cost of cast iron is on their agenda. However, this issue is being solved differently in Russia and the rest of the world.
Japanese and Chinese steel-making companies have opted for technologies. Recently Tokyo's mass media have informed that the Nippon Steel Corporation and researchers from Sumitomo Metal Industries Ltd invented a new type of stainless steel that is 20% cheaper than the standard one. The costs were cut through reducing chromium content and replacing nickel with tin. Russian manufacturers state that Chinese companies have made even more impressive progress, starting to produce stainless steel where manganese and nitrogen act as alloying elements. Such steel is cheaper than chromium-and nickel and even Japanese chromium steel.
Alexander Kolba, Technical Director of FERROBANK-ENGINEERING LLC, thinks that the steel developed by the Japanese can be used in manufacturing of home appliances. As for its application in construction and chemical industry, it should be analyzed how stainless "tin" steel will behave in corrosive environments. Anyway, he thinks that the Japanese and Chinese have selected the right decision by reducing application of costly alloying elements, while retaining characteristics of stainless steel.
Anatoly Filippenkov, General Director of NPP FAN CJSC, Doctor of Engineering, asserts that research and advanced developments are very difficult to carry out in Russia. For example, his research and development company has developed an alloy with addition of chromium and aluminum. It turned out to be more durable and cheaper than standard stainless steel. The research reports were forwarded to Russian factories - none of them got interested. Eventually, the proposal was sent to Belarus where it immediately found response, because Belorussian companies are interested in increasing metal supplies for machine-building.
A. Filippenkov states that in Russia there is an established system, which rejects any innovations at the stage of development. Metallurgical companies have quite often had negative experience; therefore, owners forbid managers to allocate money to R&D. Consequently, no one is also interested in ready-to-use developments: Russian metallurgists are used to earning their profit through increasing prices for their products rather than through decreasing costs.
Alexander Kolba is confident that though Russian steel-makers demonstrate no interest in innovations, work on development of new types of steel and alloys will have to be done: the metal market will favor only those who will find the optimum balance between price and quality of products.
At present, in Russia, research is being performed to create cast carbide alloys from cast iron alloyed with inexpensive elements. A. Kolba believes that if the research is successful, processing tools will be made from cast iron rather than from expensive tungsten alloys. The expenses on tools, which account for up to 40% in the metalworking manufacturing, will decrease considerably. On the other hand, Russian manufacturers may not feel it, as domestic metallurgists are about thirty years behind other countries in production of non-alloyed steels.
The developers realize that a range of measures must be implemented to decrease substantially expenses on alloying elements, to eliminate application of rare-earth metals, to reduce cost of deoxidizing agents when introducing alternative inexpensive and highly efficient methods of processing of liquid and hard metal. Vladimir Afanasiev, a professor from Kuzbass, did a lot in this field, but the principles laid down by him are being further developed reluctantly and are not implemented due to rigidity of management of metallurgical companies and customers who got used to conventional alloys that are already more than 30-80 years old.
In fact, the Russian metallurgy needs being "alloyed" with advance technologies and equipment. The innovative advancement of the industry is constrained not only by neophobia or commonplace laziness, but also by mentality typical of owners of steel-making companies. Experts say that instead of generating profit, metallurgy should focus on achieving technological objectives aimed at cost reduction and improvement of operating as well as technological characteristics of metal products. However, for many years Russian metallurgists have been concerned about increasing of capitalization through financial transactions and manufacturing of larger quantities of low-processed products. That is why, sales "sagged" considerably during the crisis.
To be fair it should be noted that the similar situation is evidenced in petroleum chemistry, machine-building, agriculture and other industries. The Russian government is unable to make any fundamental changes, because it has been privatized by commodity lobbyists for a long time. The unregulated development of economy results in lack of quality steel, advanced machine-building and strong scientific schools in the country. However, similarly to China, there is high inflation that threatens to scale down the demand for raw materials, pushing it into the abyss of another economic crisis.
|Consulates and Trade Offices
|News and Analysis
|About the Project
© RusBusinessNews, 2009.
All rights reserved.
Establishing a hyperlink to RIA RusBusinessNews is required for using any of the material published on this website.
News and analytical reviews are translated into foreign languages by the TRANSLIT Translation Agency
|«Sum of technologies»®