At the moment, public JSC Azovstal, Alchevsk, and Ilyich Iron and Steel Works are the major Ukrainian producers of shipbuilding plates. Azovstal holds the leadership in plate production accounting for some 36-59% of the total ship plate output.

SHIPBUILDING STEEL

Igor NIZOV, deputy commercial officer for foreign economic contacts with Azovstal Iron and Steel Works

At the moment, public JSC Azovstal, Alchevsk, and Ilyich Iron and Steel Works are the major Ukrainian producers of shipbuilding plates. Azovstal holds the leadership in plate production accounting for some 36-59% of the total ship plate output.

Public joint-stock company Azovstal Iron and Steel Works (ISW) produces plates and shapes for shipbuilding industry applying a modern technology approved by classification societies of the seven shipbuilding leaders, namely UK, Norway, Germany, Russia, the USA, France, and Japan. Moreover, Azovstal uses up-to-date equipment, machinery, and automatic control systems. Rolling and finishing machinery installed in the plate-making shop manufacture high-precision plates of the required sizes and flatness.

Azovstal has a product quality management system certified as ISO 9001 by the Canadian Quality Certification Bureau (production of steel plates and continuous-cast slabs, ingots, plates and sheets of carbon, low-alloy, and alloy steels; certificate No.96-293 of 08/12/96), while steel plate production is certified as API Specification 2H and 2Y by the American Petroleum Institute (licenses No.2Y-0004 and No.2H-0009 of 11/14/97).

Prior to the crisis that is ravaging the Ukrainian shipbuilding at the moment, Azovstal ISW worked in tight cooperation with Okean Shipyard and Shipyard Named After 61 Communards, Nikolaev city; JSC Zaliv, Kerch city; Leninskaya Kuznitsa, Kiev city; and other shipyards and ship repair facilities. At that time, Azovstal was a reliable supplier of high-quality metal for construction and repair of various types of watercraft.

Owing to shortage of orders for shipbuilding steel on the domestic market, Azovstal started offering plates bearing all the proper certificates of European, American, and Japanese classification societies on the global market.

To improve homogeneity of mechanical properties of rolled products, Azovstal has introduced sort regulation of chemical composition of cast steel with narrower margins of carbon and alloying element contents than required by certification societies and standards.

It is worth mentioning that considerably lower contents of detrimental inclusions (phosphorus and sulfur) provide production of high-reliability and brittle-failure-resistant rolled steel.

Besides to plates (normal and high-strength), Azovstal manufactures high-strength cold-resistant structural steels and Z-steels for the shipbuilding industry, as well as steels for construction of offshore platforms complying with the US standards API Spec 2H and 2Y.

Azovstal pursues an export policy aimed at promotion to new markets, expansion of types and sizes of products manufactured, and at 100%-satisfaction of clients’ demands with top-quality service including timely delivery and total product certification. Owing to this, Azovstal has significantly boosted the portion of shipbuilding plates in the total plate exports.

Most notable are the years 1997 and 1998, when the overall sales of plates plunged 6.3% down as a result of the crisis that broke out in the second half of 1998, while sales of shipbuilding plates gained 6.2% against 1997. Though, even worse situation was traced in 1999, when the plate market was almost dead for nearly two thirds of the year (contrary to market for steel coils). In addition, that year was the most unfavorable in terms of the total plate shipments, which amounted to only 70% of the respective 1997 figure. Nevertheless, the share of shipbuilding plate steel did make up nearly a half of the total plate products sold (see table 1).

The European, US, Singaporean, Malaysian, Chinese, and Indian markets are the traditional places for Azovstal ship plates. The aggravated crisis took its toll of the mentioned markets and the market for shipbuilding plates narrowed down to Western and Eastern European countries and Singapore in 1999. Moreover, the US and Chinese markets were completely lost. The company left the US market back then due to the existing referent prices (introduced by the agreement), which were actually higher than prices of American steelmakers. As concerns the Chinese market, shipments were discontinued owing to low prices in China (beyond the breakeven point for Azovstal).

Table 1. Shipments of rolled products to the domestic and global markets (‘000 tonnes)

Table 2. Plate shipments of JSC Azovstal (‘000 tonnes)

Redistribution of export flows between Europe and Singapore should be considered in details. In 1999 exports to Singapore increased 60% contrary to a 40% drop in Europe-bound exports. This situation was caused by the early recovery of the Singaporean market, direct contacts between Azovstal and shipyards, warehouses, and certainly by the comprehensive range of sorts and sizes of products manufactured. Sales distribution in Europe was uneven, e.g. product sales dramatically plummeted in Northern and Central European countries, notably 82% down in Norway, 88% down in Poland, and 30% down in Germany.

At the same time, Azovstal has managed to keep up the sales in the Black Sea and Mediterranean countries and even considerably boosted sales of shipbuilding plates in selected countries in 1999 compared to 1998. For instance, export supplies to Croatia gained 55%, to Romania +10%, and to Turkey +2%. In addition, Greek shipyards received the first shipments of Ukrainian steel.

Sound approach of Azovstal ISW to take all the advantage possible of the favorable location of Azovstal port favorably influenced the situation. In particular, this primarily reduced transportation costs while working under the FOB terms. It should be mentioned that the port is an up-to-date international trade junction with all the necessary equipment to accept and handle vessels, 5,500 tonnes in tonnage and 5.4 meters in extreme draught. Since 1995, 1,246 tonnes of metal products have been handled in the port. It should be mentioned that transshipment volumes have been gradually rising ever since 1995, e.g. the port handled 180,000 tonnes of metal cargo including 35,000 tonnes of plates in 1995 and 307,000 tonnes of metals including 91,000 tonnes of plates in 1999.

Besides to direct savings on lower transportation expenses, utilization of Azovstal port gives an opportunity to sell shipbuilding plates via the direct chain from Azovstal port — to shipyard — to consumer. This scheme considerably improves the odds for Azovstal ISW in competition with other producers of ship plate steel, mainly those European.

Azovstal is the only enterprise in the CIS employing the optimal way of large plate production for shipbuilding needs. This approach combines major domestic and foreign achievements in the sphere of high-quality steelmaking, such as:

desulphurization of iron;

application of extra-pure (sulfur-free) metal scrap;

synthetic slag treatment;

silicocalcium treatment;

argon protection of metal jet during continuous casting;

diffused dehydrogenation while cooling piled slabs;

controlled heating of slabs prior to rolling;

hot rolling with controlled reduction of metal in finishing cuts;

secondary diffused dehydrogenation of rolled steel;

100% ultrasonic testing of steel being rolled.

At present, Azovstal supplies plates of the following sizes:

plates, 6 to 50 mm thick;

slabs, 51 to 300 mm thick;

plates and slabs, 1,500 to 3,200 mm wide;

plates and slabs, 6,000 to 20,000 mm long.

Within the first two months of 2000 Azovstal ISW restored its presence at shipyards of Poland (sales to these companies have already exceeded the 1999 volumes) and Norway (sales have already come to 46% of the respective 1999 figure).

There has also been traced a certain increase in ship plate sales to Romania, Croatia, Turkey, and Greece. Altogether in the 2 months in 2000 Azovstal sold 90% more shipbuilding than in the respective period of 1999, though the total exports of plates barely went up by 44%. Increase in shipbuilding plate sales is followed with about as impressive price growth (the prices reach USD/t 260-300 FOB).

The range and shipments of normal and high-strength plates and shapes (in compliance with requirements of classification societies) under the US standard ASTM A 13/A131M and GOST 5521 are presented in table 2.

Sale analysis on particular types of shipbuilding plates evidences considerable changes in the sale pattern within the period of 1997-1999. Needless to say, that was the result of redistribution of export flows brought about by correction of the shipbuilding plate market. Though in 1997 sales of ship steel certified by German Lloyd’s, Lloyd’s Register, and Det Norske Veritas were practically the same, the situation changed abruptly in 1998-1999. The year 1998 saw a rise in trade with Europe and abandonment of the US market, i.e. an increase in orders for plates certified by German Lloyd’s and Lloyd’s Register and a drop in orders for plates bearing certificates of the American Shipping Bureau. In 1999 the situation reversed, that is the number of orders for plates approved by European classification societies lowered indicating a drop in sales in Europe, while the quantity of orders for plates certified by the American Shipping Bureau went up illustrating growth in shipments to the American-oriented shipbuilding industry of Singapore.

A more detailed analysis of ship plate exports in 1999 indicates that plates certified by the American Shipping Bureau led the way accounting for 40% of the total physical ship steel sold. Singapore was the major consumer of these products, while shipyards of Romania and Turkey purchased much smaller shipments. Shipbuilding steel certified by German Lloyd’s and Det Norske Veritas ranked the second and the third with 18% and 20% of the total respectively.

Polish and Croatian shipyards were the main purchasers of shipbuilding steel certified by German Lloyd’s. Shipbuilding plates with certificates of Det Norske Veritas were primarily ordered by Norwegian and Croatian companies, while ship plates certified by British Lloyd’s, Bureau Veritas, and Marine Register of Shipping were supplied mainly to Indian, Turkish, Greek, Lithuanian, and Russian shipyards (totaling 22%).

It is worth mentioning that shipbuilding plates’ specifications usually embrace several steel grades from common to high-strength. Azovstal prefers getting orders for the most complicated specifications consisting of high-strength steel grades of the 32nd and the 36th categories.

Undoubtedly, it is too early to state a complete market stabilization, nevertheless the overall situation has improved both on domestic and global markets (in 2000 Azovstal recommenced supplies of ship plates to Kerch-based JSC Zaliv and Kiev-based Leninskaya Kuznitsa) getting more optimistic outlooks for the future.

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