Responsible editor and member of the editorial board of Metal magazine, deputy director of Derzhzovnishinform Mr. Vladimir Pikovsky addressed first deputy director of Metallurgprom Association Mr. Viktor Lesovoy with a request to tell our readers about la
“LONG-TERM BUILDING” OR “INCOMPLETE CONSTRUCTION”
“LONG-TERM BUILDING” OR “INCOMPLETE
CONSTRUCTION” –
A DEVELOPMENT PROGRAM FOR MINING AND METALLURGICAL SECTOR
Responsible editor and member of the editorial board of
Metal magazine, deputy director of Derzhzovnishinform Mr. Vladimir Pikovsky addressed
first deputy director of Metallurgprom Association Mr. Viktor Lesovoy with a request to
tell our readers about latest developments in working-out of the draft “National
Development Program of the Ukrainian Mining and Metallurgical Sector until the year
2010”. High quality and competitive capacity of the products must be the key objectives
of the industry’s technical re-equipment and upgrade. It must be pointed out that the
Program itself is only an adjusted development project, which takes into account the
future strategy of the country’s economy and the current financial state of
metallurgical enterprises.
- Mr. Lesovoy, now a lot of activity is going on, which
is aimed at improvement of the “National Development Program of the Ukrainian Mining and
Metallurgical Sector until the year 2010”. Chairman of the State Committee for
Industrial Policy Mr. Vladimir Novitskiy has presented a new doctrine of the country’s
economic development. How do the two documents envisage economic development of mining and
metallurgical enterprises?
- Before answering your questions in respect of the new
version of the Program, I would like to give a brief historical reference on drawing up of
the present “National Development Program of the Ukrainian Mining and Metallurgical
Sector”. In the Ukrainian construction industry there are such notions as “long-term
building” and “incomplete construction”. The whole process of creation of the
National Program can be referred to as “long-term construction”. Regulation of the
Ukrainian Parliament of Ukraine “On measures aimed at overcoming of the crisis in the
Ukrainian mining and metallurgical sector” determined the necessity of such a Program
and was enacted as early as in October 1998. In January 1999, the Ministry for Industrial
Policy issued the order “On working-out of the National Development Program of the
Ukrainian Mining and Metallurgical Sector until the year 2010”. In this period, active
work was launched on drawing up of the Program with the aim of further submitting it to
the Parliament for voting. The work on the Program was headed by the State Committee for
Industrial Policy, which involved the industry’s leading scientific research institutes,
design institutes, associations and individual enterprises in working-out of the Program.
A draft Program was approved by the Cabinet of Ministers, although eventually, it was not
passed on to the Parliament for debating and voting, owing to various reasons including
objective ones. Thus, the first draft Program failed to obtain the National status, i.e.
it was left on the draft stage.
Significant positive changes have occurred over the past
few years in production and financial and economic activity of Ukrainian mining and
metallurgical enterprises. First of all, these were brought about by entering into force
of the Law of Ukraine “On economic experiment at Ukrainian mining and metallurgical
enterprises”. Mining and metallurgical companies were finally given an opportunity to
earn money independently. These earnings will further determine the sources of funding of
the measures aimed at their technical re-equipment as stated in the Program. Before the
enactment of the Law, all the key ministries and departments viewed the Program as
something impossible to be fulfilled, because metallurgical companies’ poor financial
state was accompanied by the absence of reliable funding sources for the development
measures envisaged by the Program.
Presently, there are all the required prerequisites for
successful completion of drafting of the Program, taking into account the present-day
positive tendencies, and for making it the real National Development Program of the
Ukrainian Mining and Metallurgical Sector up to the year 2010.
This was the task that the Cabinet of Ministers assigned to
the State Committee for Industrial Policy. The final decision on this matter was taken by
the President of Ukraine. He issued an instruction addressed to the Cabinet of Ministers,
in which May 2001 was set as the deadline for submission of a draft National Program for
consideration by the Ukrainian Parliament.
Thus, it must be pointed out that the Program is not
something new but rather an adjusted development project, which has taken into account the
present financial state of metallurgical companies, their acquired experience of
operations on foreign markets, and the present prominent tendency towards the domestic
market’s revival. This project is clearer in terms of the property issue, defines the
notion of efficient utilization of production capacities, etc. However, the key tendency
is that after several years of operation on foreign markets, Ukrainian manufacturers have
understood the importance of high quality and competitiveness of their products These two
factors must be the key objectives of the industry’s technical re-equipment and
upgrades.
One of the most significant achievements of the new
approach towards the Program is the fact that the draft Program will be submitted to the
Ukrainian Parliament for voting together with the draft Law of Ukraine “On the National
Development Program of the Ukrainian Mining and Metallurgical Sector until the year
2010”.
This is an approach, when the National Program is
accompanied by the Law, which determines all the required legal and organizational
measures aimed at expansion of the domestic metal market, establishment of favorable
conditions in order to attract investment, and resolving of ecological and social
problems. I believe that adoption of this approach is one of the forms of State support of
mining and metallurgical companies on the legislative level. Such legislative support must
eventually be accompanied by technical re-equipment and upgrade of production. A similar
approach has long been used by developed countries, when their individual industries were
facing crisis. This kind of State support was declared the primary goal of “Development
Conception of the Ukrainian Mining and Metallurgical Sector”, which was approved by
Regulation of the Parliament of Ukraine No.385/95-VR as early as October 17, 1995. Lack of
similar legislative State support on the first stage of the Program’s creation was yet
another reason why the Program was abandoned on the drafting stage.
- Mr. Lesovoy, the State supported Ukrainian mining and
metallurgical enterprises during their difficult period by enacting the Law of Ukraine
“On economic experiment in the mining and metallurgical sector”.
- Indeed, the law on economic experiment was the State’s
weighty contribution to the process of overcoming the economic crisis in the mining and
metallurgical sector. Enterprises’ operation under the new economic conditions indicated
that Ukrainian metal-makers are capable of earning the financial means required for
technical re-equipment, augmentation of production, wage raise, resolving of social
problems etc. independently. The most important thing now is to keep this positive
tendency and provide a smooth transition between the periods of termination of the law on
economic experiment and entering into force of the law on the National Program.
Presently, metallurgical enterprises see their financial
participation in their technical re-equipment and upgrade in a different way from how they
used to see it. The former reading of the Program stated that companies included in
Metallurgprom Association were supposed to provide only 40% of the investment required for
re-equipment and production upgrades, whereas the remaining 60% of the total sum was
supposed to originate from external sources. On the other hand, the new draft envisages
this ratio as 75% to 25%, which is an indication of companies’ confidence in their own
potential. In order to successfully fulfill the Program, Metallurgprom enterprises will
have to invest approximately UAH 1.6 bln. annually. Out of the total UAH 1.61 bln.
obtained as investments in 2000 (i.e. the mining and metallurgical sector attracted the
required minimum amount in investment last year), companies’ own assets accounted for
87%, foreign investments accounted for 9%, and bank loans made up the remaining 4%. These
figures witness that if the present production rates do not go down enterprises will be
fully capable of financing their technical upgrades. In 1999-2000, a tendency towards a
growth of expenditures for replenishment of fixed assets and that towards a curtailment of
incomplete construction became especially prominent.
This is the positive background, which accompanies the
final adjustment stage of the National Program’s creation.
- Who is the designer of the draft Law of Ukraine “On
the National Development Program of the Ukrainian Mining and Metallurgical Sector until
the year 2010” and who are the primary investors in financing of the measures aimed at
fulfillment of the Program?
- The list of participants, managers, and executives is the
same. The State Committee for Industrial Policy heads the working-out of the Program, the
leading institute is the Ukrainian Scientific Research Institute of Metals, and the
responsible executives are Ukrgipromez and various industrial institutes and associations.
As concerns participation of investors in funding of the
Program’s measures, I think this will not be a problem. We must show that not only are
we capable of realization of the scheduled re-equipment measures but that we also have
already started this re-equipment and upgrading process and that it is irreversible. In
this case, investors’ participation in re-equipment of metallurgical enterprises is
guaranteed.
Availing myself of this opportunity, I would like to voice
my gratitude to the investors and owners of metallurgical and mining enterprises, which
have already taken part in modernization and technical re-equipment of metal-making
enterprises. These, certainly, include directors of CJSC Minimetallurgical Plant “Istil
Ukraina”, Energo concern (DMZ), and Danko (EMZ). Their actions are direct proofs of the
fact that the technical modernization process has already been launched and those who have
not understood this or those who refuse to admit this will soon find themselves at loss.
Mr. Pikovsky, when answering you questions, I deliberately
avoided discoursing on the content of the Program. First of all, the program is only being
worked out now. Secondly, I believe that the full understanding of the new reading of the
Program must be given by its ideologists and primary executives, namely, by the State
Committee for Industrial Policy and the Ukrainian Scientific Research Institute of Metals.
Talking about the history of creation of the National
Program I would like to draw your attention to the huge constant work, in which the
Ukrainian mining and metallurgical sector is involved with the purpose of improvement of
metallurgical companies’ operation and achievement of financial and economic stability.
Metallurgy is the only industry in the system of the State Committee for Industrial
Policy, which has kept the vertical of centralized management and coordination. This
management system looks as follows: the State Committee for Industrial Policy – the
mining and metallurgical sector (the management function) headed by the chairman of the
Committee – Metallurgprom Association and sub-industrial unions and associations –
mining and metallurgical companies. These clear interconnections from the Committee to
individual metallurgical enterprises allows the controlling bodies to constantly monitor
the current situation and economic changes in metallurgy, initiate joint actions aimed at
stabilization of the situation, and address the higher authorities with specific
improvement proposals.
As successful examples of such work, I would like to note
drawing up of the Conception, its adoption by the Parliament, acceptance of the top
priority of the mining and metallurgical sector as the basic industry of the country’s
economy, establishment of a number of projects within the framework of the National
Program, the law on participation of mining and metallurgical enterprises in the economic
experiment, the present work on the draft Law on the National Program, working-out of the
corrected version of the draft Program, and so on.
This constant work on the Program forces the metallurgical
enterprises to implement the most efficient methods of technical re-equipment and study
the experience of other enterprises, which are ahead in terms of technological
development. As you can see, no efforts have been wasted in vain, and our “long-term
construction” allows metallurgical companies to constantly participate in the process of
the industry’s modernization.
- Today, can we clearly imagine what specific changes
must be made in the structure of metallurgical enterprises in order to make their products
competitive enough?
- Now I would like to speak about some specific measures
offered by metal-making companies to be included in the Program. In the year 2010,
Ukrainian metallurgy plans to manufacture 28 mln. tons of iron, 33 to 34 mln. tons of
steel, and 29 mln. tons of general-use rolled metal products. According to the forecast
for 2001, proceeding from the production figures for the first 4 months of the current
year, Ukrainian metallurgical companies will make 26.5 mln. tons of iron, 33 mln. tons of
steel, and 29 mln. tons of general-use rolled metal products, which means that the
industry does not intend to increase its metal output significantly until 2010. The
present-day utilization of the available production capacities is at 70%. Taking into
account phasing in of the new capacities, major repairs of the primary technological
equipment with its further reconstruction and upgrades, and phasing out of the obsolete
and deteriorated equipment, the share of utilized production capacities may go up to 80%
by the year 2010. This more or less corresponds to the world level, which allows
enterprises to use their capacities in the most efficient way possible proceeding from
optimization of their technical and economic performance.
For example, if we consider agglomerate production,
Metallurgprom Association plans, due to major repairs of sintering machines and their
further reconstruction, to achieve an improvement in quality of agglomerate (a 2-3 time
reduction of fines, stabilization of chemical composition and basicity), reduce the energy
consumption rate in agglomerate production, and cut back harmful emissions. New production
capacities are not scheduled for putting into operation.
As concerns furnace production, repairs are primarily aimed
at overhauls of blast furnaces with their complete reconstruction and upgrades (at the
example of blast furnace No.3 at Zaporozhstal Integrated Mill) and putting out of
operation all the obsolete and deteriorated furnaces.
Complete overhauls of metallurgical furnaces suppose
upgrades of air heaters and primary technological equipment of blast furnaces,
reconstruction of the dust collection system of the skip pit and casting yard,
introduction of automated systems of control over technological processes, a more wider
utilization of the technology of pulverized coal fuel injection into the blast-furnace
hearth, and other measures. Reconstruction of blast furnace No.3 at Zaporozhstal jointly
with Ukrgipromez proved the statement that all the possibly necessary upgrades and repairs
at Ukrainian metallurgical mills can be made by Ukrainian scientists and production
specialists within the shortest terms and at a high quality level.
Konstantinovska Metallurgical Mill has scheduled a
remodeling of one blast furnace for production of special-purpose iron for
machine-building.
The primary goals of furnace modernization are reduced
consumption rates of raw and energy resources, improved quality of iron, and better
ecology.
Ukrainian steel-smelting production has scheduled repairs
on a larger scale. In 2000, out of the total 30.7 mln. tons of steel produced, open-hearth
steel accounted for 49.1%, oxygen-converter steel – for 47.9%, and electric-furnace
steel – for only 3%. Only 18% of steel were made by continuous-casting units.
Until 2010, it is supposed to substantially change the
ratio of steel production methods. In particular, open-hearth steel will account for 36.3%
of the total, oxygen-converter steel – for 45.6%, and, finally, electric-furnace steel
– for 19.1%.
Around 48% of the total quantity of continuously-cast steel
billets will be made by units for continuous billet casting. This improvement will reduce
the feedstock consumption coefficient for steel rolling from the present 1.3 to 1.154.
A weighty increase of the share of electric steel-making in
steel production and augmented output of steel that underwent out-of-furnace treatment
(stove-busket, degassing, powder wire treatment, etc.) will contribute to higher
competitiveness of Ukrainian metal on domestic and foreign markets.
As concerns rolling production, which is the final stage of
manufacturing of end metal products, all the measures will be aimed at introduction of
technical and technological novelties that will improve product quality and competitive
capacity. Only a few rolling mills out of the dozens that are currently in operation at
Ukrainian metallurgical enterprises correspond to the requirements of up-to-date
metallurgical production. These are wire mills at Mekeyevka Integrated Mill and
Krivorozhstal, plate mill 3600 at Azovstal, and plate mill 3000 at Ilyicha Iron and Steel
Works. This is why the primary tasks today are to reconstruct the operating mills, upgrade
their equipment, expand product assortment, reduce energy consumption rates, and phase out
all the deteriorated production capacities.
I would like to emphasize that when working on technical
re-equipment of production, heads of metallurgical enterprises must not forget about the
high importance of energy capacities and, in particular, pay close attention to oxygen
production, which is currently the most energy-consuming process in metal-making.
This was only a brief review of the primary directions of
technical re-equipment and upgrades of Ukrainian metallurgical enterprises scheduled up to
the year 2010.