Un­der Oars in a Calm Sea

In 2014 Be­laru­sian Steel Works in­creased its ex­port de­spite the slow­down on the global mar­ket of fer­rous met­als

Economy of Belarus - - CONTENTS -

In 2014 Be­laru­sian Steel Works in­creased its ex­port de­spite the slow­down on the global mar­ket of fer­rous met­als

Over the past 15 years the global met­al­lurgy has ex­pe­ri­enced at least three ma­jor re­ces­sions. Ev­ery re­ces­sion was fol­lowed by a sharp decline in prices for metal prod­ucts, from 30% to 70%. The devel­op­ment of the steel mar­ket was not al­ways in synch with sim­i­lar pro­cesses go­ing on in the global econ­omy.

Off­set­ting the Losses

More than that, some of them had re­ally rough times last year. Many global cor­po­ra­tions re­duced out­put, froze in­vest­ment projects, shut down their fac­to­ries, re­duced staff num­bers and cut down on other ex­penses in or­der to stay afloat in this dif­fi­cult time. Nev­er­the­less, some of them could not avoid mis­takes and thus went bank­rupt.

For ex­am­ple, OAO Amurmetal (Kom­so­molsk-on-Amur, Khabarovsk Krai of Rus­sia), which was founded at the same time as BMZ, went bank­rupt and was put up for auc­tion. Both plants were built in the early 1980s to the same de­sign project, were sim­i­lar in their steel­mak­ing ca­pac­ity, but their sto­ries, as time showed, turned out to be dif­fer­ent.

Last year the global steel de­mand was very low, and was fre­quently on the verge of melt­ing down. Such a sit­u­a­tion can be com­pared to the calm of the sea with no winds, when sail­ing is dif­fi­cult. The move­ment can only be re­sumed af­ter the cru­cial change in the weather.

“It goes with­out say­ing that for our plant, which is in the mid­dle of re­tool­ing and in need of ad­di­tional funds, such a sce­nario was ab­so­lutely un­ac­cept­able. As is known, you can use oars to power your ship on a calm sea. There­fore, de­spite the limited re­sources we were work­ing hard to­wards in­creas­ing ex­port, sell­ing prod­ucts with high added value, and tap­ping into new mar­kets,” Ana­toly Savenok em­pha­sized.

Last year the plant ad­vanced to the mar­kets of five coun­tries, in­clud­ing Al­ge­ria and Sri Lanka. BMZ – Man­age­ment Com­pany of Be­laru­sian Met­al­lur­gi­cal Hold­ing Com­pany Ana­toly Savenok said.

The com­pany’s per­for­mance in­di­ca­tors in 2014 were quite il­lus­tra­tive. Be­laru­sian Steel Works ex­ported over 2 mil­lion tonnes of steel prod­ucts, up by 14.6% in phys­i­cal terms over the pre­vi­ous year. How­ever in terms of money, the ex­port growth made up only 5.6%. The only rea­son for such a dis­crep­ancy is the sit­u­a­tion on the global mar­ket of fer­rous met­als.

At the same time, last year marked some re­cov­ery on the do­mes­tic mar­ket of metal prod­ucts. Metal con­sump­tion in me­chan­i­cal en­gi­neer­ing and con­struc­tion were main­tained mostly by means of state sub­si­dies and in­vest­ments. How­ever, as far as prices are con­cerned, a brief price rise was al­ready over in au­tumn, be­fore it could even gain mo­men­tum.

The con­tin­u­ous stag­na­tion of the global econ­omy, re­duc­tion in global con­sump­tion and tough­en­ing com­pe­ti­tion pri­mar­ily on the part of Chi­nese man­u­fac­tur­ers kept metal prices low. As a re­sult, Be­laru­sian Steel Works lost over $100 mil­lion in for­eign cur­rency rev­enues in 2013 and $65.4 mil­lion in 2014.

How­ever, th­ese is­sues were com­mon for the ab­so­lute ma­jor­ity of met­al­lur­gi­cal com­pa­nies in 2014.

“Due to the timely man­age­rial de­ci­sions the com­pany has never had to cut jobs or to roll back its up­grade ef­forts. How­ever, we still in­curred some losses, mostly fi­nan­cial ones. The re­duc­tion in global prices af­fects for­eign cur­rency inflow in Be­larus, while Be­laru­sian Steel Works is one of the coun­try’s five big­gest hard cur­rency earn­ers. Se­condly, the price drop slows down the im­ple­men­ta­tion of key in­vest­ment projects aimed at pro­duc­tion up­grade,” Direc­tor Gen­eral of

In­deed, al­most all an­a­lysts agree that the is­sues that have emerged in re­cent years have been brought about by a sig­nif­i­cant ca­pac­ity in­crease in China’s steel in­dus­try in 2010. This led to the over­pro­duc­tion of fer­rous met­als, and con­se­quently, a price drop, tougher com­pe­ti­tion and a wave of bankrupt­cies.

Be­laru­sian Steel Works ( BMZ trade­mark) ex­ports up to 85% of the out­put. BMZ prod­ucts sell in 114 coun­tries, in al­most all the con­ti­nents of the globe. The do­mes­tic steel pro­ducer is not im­mune to ex­ter­nal shocks. How­ever, the com­pany has so far man­aged to by­pass reef points prov­ing the viability of its busi­ness model.

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