Ukrainian Steelmaker Zaporizhstal to Transition from Open-Hearth to Converter Process by 2014

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Researched by Industrial Info Resources (Sugar Land, Texas)--Ukraine's fifth-largest steel producer, Zaporizhstal Integrated Iron and Steel Works (KSE:ZPST) (Zaporizhia, Ukraine), announced that it intends to transition from the current open-hearth method of steelmaking to the converter process by the end of 2014.

Zaporizhstal's engineers undertook an in-depth study of world steel production methods before finalizing on the oxygen converter process. In 2008, Zaporizhstal signed a contract with Siemens VAI Metals Technologies (Linz, Austria), a subsidiary of Siemens AG (NYSE:SI) (Munich, Germany), to construct an oxygen-converter workshop to replace its obsolete open-hearth furnaces.

Construction of the converter workshop is scheduled to start this year. The facility will be adjacent to the existing rolling shops. The first stage of the project plan involves the demolition and removal of all existing objects on the site. When completed, the converter shop will contain two iron ore desulphurization units, two 250-tonne converters, two double-position ladle furnaces, a ladle-type vacuum vessel and two thick-slab continuous casting machines.

The oxygen converter will be the first of its type in Ukraine, where the older open-hearth method of steel production prevails. Zaporizhstal is confident that the changed production process will lead to increased competitiveness, a wider product range, and a reduction in power sources, including natural gas. The latter is an important consideration in Ukraine, where problems with the supply of energy, in particular gas, have caused many steelmakers to examine ways of conserving energy and reducing consumption. The conversion of open-hearth furnaces in Ukraine is expected be a high priority for many companies.

The Ukrainian government has attempted to ease the financial situation for the steel sector by implementing a memorandum of mutual understanding under which steelmakers are permitted to freeze tariffs for electric power supply and rail transportation, and additional charges for natural gas have been waived. However, the memorandum is only effective until March this year.

In 2009, Ukraine's crude steel production reached the lowest level since 2000, declining 17.4% from 37.1 million tons in 2008 to 29.8 million tons in 2009. Production of pig iron and finished rolled products also declined in 2009 by 13% and 15%, respectively.

Much of Ukraine's steel production is destined for the export market. In 2009, about 85% of all rolled steel produced in Ukraine was exported, with 10% heading for China. However, even the export figures reflected the general downturn in the steel industry, with rolled steel product exports down 18% compared to 2008.

The global financial crisis had a strong effect on Ukrainian steelmakers. Demand for steel products in Ukraine in 2007, before the crisis, was a healthy 9.4 million tons of finished steel. However, in 2009, this fell to an estimated 5 million tons.

According to the Ukrainian Ministry of Industrial Policy, steel production in 2010 is expected to show a slight improvement from 2009 figures. The ministry forecasts an overall increase of 3% to 4%, with production expected to reach 3.5 million tons for crude steel, 26.5 million tons for pig iron and 28.5 million tons for finished rolled steel.

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