For many years, the author of the following article was in the thick of events related to immense plans on further development of Ukrainian metallurgy and particularly coke-making industry. Programs elaborated in the beginning of the eighties seemed to re
LIVING IN CLOVER IN UKRAINE
Draft National Development Program for Mining and Metallurgical Complex of Ukraine
For many years, the author of the following article was in the thick of events related to immense plans on further development of Ukrainian metallurgy and particularly coke-making industry. Programs elaborated in the beginning of the eighties seemed to remain efficient for quite a long period of time up to 2000-2005. During that period, economic activity was subject to rules of planned economy while the State Planning Committee of the USSR was notable for thorough grasp of the smallest details. However, life brought in changes so complex and abrupt that no man of sense could have ever foretold them in advance.
During the years of Ukraine’s independence, two attempts aimed at creation of National Development Program for Mining and Metallurgical Complex went phut. In both cases, draft programs were sent for modification and further on lost their national status turning into insignificant branch-wise programs. Such downward movement seemed to be quite natural since approaches to their elaboration remained the same and embraced the following stages:
- collection of proposals uttered by enterprises;
- making summaries on separate industries;
- compilation of industries accompanied with calculation of consumption indices (per ton of finished rolled products).
Along with this, elaborated programs never gave proper heed to interdependence of domestic and foreign metal consumption as well as expedient volumes of its output. Issues related to power and resource substantiation of such programs have never been reckoned as well. What is more, metal consumption per capita also remained unknown.
Such activity coincided with establishing and reforming of governmental bodies in Ukraine. Elaboration of the first national program fell under supervision of the former Ministry of Industry, which embraced metallurgical, chemical, and light sectors of Ukrainian economy. Due to insignificant interrelation between available data, that program could not be applied on national scale being appropriate for separate industries only. However, this does not exonerate its developers since the latter had to joint their efforts with other ministries and departments.
Elaboration of the second program was directed by the Ministry of Industrial Policy, which supervised all industrial sectors of Ukrainian economy. In this case, program’s failure is inexcusable since the Ministry even failed to coordinate the issues related to metal output and consumption.
Despite the third attempt aimed at introduction of the National Development Program for Mining and Metallurgical Complex is under way today, previous questions remained the same. What criteria should be taken into account to forecast metal output? What are the prerequisites of such program’s implementation? In the recent years, these issues became even more complicated since metallurgic enterprises featured changes in their ownership. In 2000, coke-making industry was notable for considerable augmentation of production volumes while the Law of Ukraine “On economic experiment in mining and metallurgical complex” stipulated the increment of financial indicators. A number of enterprises were encouraged by promising upward tendencies registered in 2000 and thus scheduled further upsurge of metal output even despite 80% of their produce is bound for export and antidumping inquiries against Ukraine become tougher continuously. This situation bears a strong resemblance to vicious circle. Along with this, tendencies featured by world metal market remain insufficiently studied. What is more, near-term and long-term outlooks for further development of Ukrainian machine-building have never been determined as well.
On the contrary, Russia defined its strategic plans more accurately. In October 2000, for instance, the All-Russian Conference of Metallurgists determined major tendencies of metal consumption. AutoVAZ (Volzhskiy Automobile Works) announced its future plans to manufacture 750 thousand cars per year. Other machine-building sectors of Russian economy including both civil and military industries uttered their needs as well.
To compare, Ukraine took no steps in that direction at all. Meanwhile, preferable power resources also turned into the matter of paramount importance affecting further elaboration of the program. Would Ukraine develop its own coal-mining industry or remain dependent on foreign power supplies?
In 2000, specific coke consumption amounted to 619 kg of coke per ton of cast iron on the average, as compared to 575 kg of coke registered in the beginning of 2001. Simultaneously, specific consumption of natural gas ranged within 75-80 cu. m per ton of cast iron. In such circumstances, perspectives of coal-mining industry remain rather gloomy. Domestic metallurgical enterprises ought to know the necessary quantities of raw materials (namely coal) needed for their normal functioning.
Taking into account high prices for natural gas and its transportation, it would be expedient to augment specific consumption of coke. However, development program for Ukrainian coal-mining industry, being in the process of elaboration now, evades such questions. This program had been excoriated and rejected even before its full completion. What is more, every time new politicians in the Ukrainian government embark on its development such program sequentially changes its status vacillating between regional and national interests.
As regards numerous questions broached by the author, this article may seem to oppose the elaboration of National Development Program for Mining and Metallurgical Complex of Ukraine. On the contrary, creation of programs based upon scientifically substantiated data would allow all economic entities to plan effective development strategies for their enterprises.
Should situation in coke-making industry be viewed as a separate section of the program and should its development be backed by correct basic data, the issue of excessive capacities could be settled as well. Productive capacity of coke-making enterprises totals 23 mln. tons of bulk coke while foretold coke consumption will reach 19 mln. tons. Thus, excessive capacities will amount to 4 mln. tons, which also equals productive capacity of the leading Ukrainian coke-making plant namely OJSC Avdeyevka Coke Chemical Works.
Today, daily output of metallurgical coke exceeds the demand for this commodity by 3 ths. tons. However, metallurgical enterprises finally got the owners and thus they would be unlikely to announce their closure voluntarily or initiate diversification of their activity. What is more, there are no theoretical prerequisites for such diversification since in the past ten years, Ukrainian scientists suffered from insufficient financing and evaded the issues of possible restructuring and technical re-equipment of coke-making industry. To some extent, such situation brought to naught the effectiveness of the Law “On economic experiment in mining and metallurgical complex” since accumulation of funds necessary for efficacious technical re-equipment ranked among its main purposes. It is nonsense but technical re-equipment coincided with scientific recession.
In such conditions, a number of coke-making enterprises with total productive capacity of 4 mln. tons will be inevitably closed, which will simultaneously result in staff reduction by 9 ths. workers.
At the same time, should basic data indicating metal consumption be wrong (i.e. overstated), the existing productive capacities would be sufficient to provide necessary amount of coke (on the assumption that provision of coking coal will be adequate).
However, in such case coke-making enterprises would have to settle adjacent problems consisting in sale of coal-tar pitch and its by-products. Ukraine possesses sufficient capacities to process coal-tar pitch. Nevertheless, Russia’s aluminum industry refused to use pitch coke as raw stock for anode material, which poses certain difficulties for Ukrainian enterprises since further augmentation of coke output is hampered with impossibility of its by-products’ sale. Thus, other ways of its utilization should be found.
Analyzing current state of coke-making industry, it becomes clear that major efforts should be concentrated on effective restructuring, not expansion of productive capacities, and what is more, such activity will demand immense material and financial inflows. Thus, evaluation of necessary production volumes of metal output turned into cornerstone of activity aimed at creation of the program.
Today, governmental bodies are unable to forecast volumes and pattern of metal consumption. In such case, necessary basic data for the program should take into account the existing mineral and organic resources of Ukraine.
Nowadays, European countries possess scarce reserves of raw materials for metallurgy (coal, iron ore, manganese ore, nonmetallic materials, etc). At the same time, immense reserves of such materials are deposited in Ukraine. In any case, they would be of paramount interest for Europe while their processing and consumption will definitely meet stable demand.
Thus, Ukraine should define production volumes of metal taking into consideration the needs of European countries and its own power resources. Such approach is notable for its global character and may be used for long-term forecasting.
To summarize, one should wish extensive group of developers engaged in elaboration of the national program avoid previous mistakes and create well-grounded fundamental document, which would turn into reliable guide for Ukrainian metallurgy.
COMMENT
Yuriy STASOVSKIY, deputy head of mining and metallurgical department with Dnepropetrovsk regional state administration
- Mr. Stasovskiy, draft National Development Program for Mining and Metallurgical Complex till 2010 is currently in the process of discussion. What are the outlooks for development of mining and metallurgical industry in Dnepropetrovsk region?
Outlooks for development of mining and metallurgical complex in Dnepropetrovsk region seem to be quite promising due to rich source of raw materials, noteworthy scientific and technical potential able to put into practice the latest technological achievements, and notable export potential, which can turn Dnepropetrovsk region into the leading world exporter.
In the existing circumstances, foreground development of mining and metallurgical complex in Dnepropetrovsk region is stipulated by the following factors: economic effectiveness (profitability); ecological cleanliness; rational use of natural resources; science intensive technologies; inflow of consumer goods to domestic market; efficacious utilization of mineral raw materials, fuel and power resources, material and financial resources; switching to production of competitive high-quality produce; equilibration of the industry; withdrawal of the weary and outdated metallurgical aggregates and closure of unprofitable enterprises; temporary suspending and saving of excessive production capacities (30%) to back possible recovery of metal-consuming industries of Ukrainian economy; and settlement of social issues.
Taking into account the mentioned fundamental principles, sectoral associations, enterprises, scientific research institutes and planning institutes should elaborate concrete proposals to embrace the following activities: perspective renovation of capital assets and technologies covering all stages of production; withdrawal of idle equipment; employment program for released manpower; production dynamics for major and perspective products; settlement of environmental issues (including wastes treatment, reduction of deleterious discharge caused by aggregate and machine exploitation, etc); restructuring; personnel policy (staff training and retraining); curtailment of specific consumption of power and material resources; change dynamics of salaries and wages in the pattern of prime cost; certification of products; further perfection of production pattern; pricing policy; production of new science intensive commodities; increase of products’ competitiveness.
In modern market conditions, competitiveness of metallurgical products depends on prominent qualitative indicators and acceptable price. Thus, optimal products should combine low price and high quality.
In turn, all these factors should back the development strategy for mining and metallurgical complex elaborated for the next ten years.
National program should not be excessively detailed giving proper heed to forecasted situation on domestic and foreign markets, and possible ways to renovate capital assets of the existing enterprises and determine priorities for newly established entities.
In the first place, experts have to elaborate the strategy of after-crisis development of the industry dividing it into three periods: the year 2001 (organizational stage), 2002-2004 (investment encouraging of industrial enterprises), and 2005-2010 (boosted industrial development accompanied with attraction of serious investors). Besides, scientists and experts should join their efforts to accelerate industrial recovery, ensure technical renovation of the industry, and augment its effectiveness and competitiveness. Along with this, the following issues should remain the cornerstone of the mentioned activity: development of innovative technologies; increased science intensiveness of manufactured products; introduction of production – science – finances scheme; intersectoral and sectoral balances; development of venture business; expansion of technical parks and technopolises; strengthening of co-operation between scientific research institutes, the National Academy of Sciences of Ukraine and industrial institutions; launching of up-to-date mobile mini-plants.
Economies’ orientation on intellectual production, boosting of science intensive industries and introduction of new technologies undoubtedly became a cornerstone tendency of global development. Such economic development maximally fosters effective and rational use of all resources including intellectual ones.
Strategic solutions aimed at renovation of existing domestic industries and introduction of new equipment (both autonomous and that subject to subsequent integration into existing production chains) should meet technological and organizational requirements of newly establishing mini-plants. Numerous examples brightly illustrate possible implications of such approach at Ukrainian enterprises. For instance, production of bars embracing broad variety of dimension-types could be achieved by means of up-to-date technological scheme introduced on the basis of modernized steel-smelting equipment at OJSC Petrovsky Metallurgical Works of Dnepropetrovsk should the latter be vested with the status of a mini-plant and meet corresponding requirements. Besides to other consequences, such measures will lead to creation of smelting-casting-rolling complex (integrated into electric smelter), introduction of out-of-furnace steel finishing, installation of continuous casting units, and utilization of the mill 550 simultaneously being in the process of reconstruction. Technical and economic assessment of such project performed by Ukrainian State Institute of Metal Articles (Ukrgipromez) has been already brought in accord with existing requirements.
State-owned Krivorozhstal Iron and Steel Works of Krivoy Rog boasts to have even greater perspectives for fundamental restructuring and stepwise transformation into a modern enterprise possessing up-to-date technologies. In this case, unique reserves of raw materials enable production of high-quality bars. What is more, facts mentioned above can be surely applied to other ferrous metallurgical enterprises in Ukraine.
Taking into account vast experience of foreign enterprises and the existing economic realities, in most cases gradual modernization of domestic entities seems to be quite inexpedient. Instead, attracted investments should back those enterprises that managed to implement module technologies. Today, any Ukrainian enterprise can embark on such modernization due to broad variety of respective schemes (including domestic technologies as well). What is more, all these procedures are notable for their compatibility and universal character. Stepwise introduction of modern technologies enables full use of existing aggregates and workshops, consecutive withdrawing of weary equipment, and refraining from complete suspension of manufacturing.
In the next ten years, metallurgy will feature broad implementation of technologies related to improved direct reduction of iron, steel smelting in electric arc furnaces, out-of-furnace steel finishing, continuous casting accompanied with specified shaping of castings (with sections close to prescribed dimensions), and continuous casting with subsequent finishing (calibrating) rolling. Such technologies will definitely lead to creation of smelting-casting-rolling mills able to fundamentally change the concept of up-to-date optimal metallurgical mini-plant. On the average, continuous casting of steel in combination with production of sheets, plates, and bars on special casting-rolling mills would allow to reduce steel consumption per ton of rolled products by 15% while power consumption will drop by 30-50%.
Industrially developed countries initiated broad restructuring of metallurgical industry, decentralization of large metallurgical enterprises (for instance, British Steel in Great Britain), withdrawal of obsolete equipment, and launching of mini-plants (with productive capacity totaling 2 mln. tons of steel per year) using the most perspective technologies of steel smelting, casting, and rolling.
Reconstruction of outdated metallurgical equipment is brought in accord with traditional technological schemes (blast-furnace production – converter process – continuous casting – rolling or smelting in electric arc furnace – continuous casting – rolling) or is adjusted to progressive breakthrough technologies (ore – steel process, electric arc smelting – combined continuous casting and rolling). At the same time, it should be taken into account that implementation of the latest technologies became more safely today.
At present, Scientific Research Institute of Metallurgical Machine-Building and Central Scientific Research Institute of Ferrous Metallurgy (Russia) have to fulfill 18 orders for launching of mini-plants in the number of Russian regions. Technical and economic estimates proved that profitability of casting-rolling mills amounts to 52% while term of their recoupment ranges within 2-2.5 years.
Pilot projects aimed at creation of mini-plants in Pridneprovye region should comply with the following foreground tasks:
- manufacturing of ferrous and non-ferrous precision products;
- centrifugal casting of tubes (40-2,600 mm in diameter) made from high-strength cast iron and globular graphite;
- processing of non-ferrous conversion metals previously used within military-industrial complex;
- processing of man-caused wastes and extraction of pure deficient metals;
- launching of smelting-casting-rolling mills to manufacture high-liquid products.
Undoubtedly, strategies applicable to technical restructuring of enterprises are a prerogative of their owners. However, state support (guarantees, tax exemptions, etc) should be rendered only to those enterprises, which strictly adhere to strategic economic development of Ukraine and ensure its economic security.
Interviewed by Lyubov SHINGUR