East Ukrainian Steel - Chances for German Investors

The global financial crisis has hit the Ukraine hard. The state is heading toward insolvency. The steel industry in the east of the country has big problems. It's suffering from a rise in gas prices...especially after the most recent gas fight with Russia. The steelworks here only have a chance of survival if the modernize quickly and comprehensively. They have to cut energy costs and they have to specialize more. Ukrainian steel makers have been turning to German technology, especially Siemens. Form its dependency in Donezk the company supplies the technology to rejuvenate Ukrainian steel. But there is competition from Japan- Siemens is determined to stay in this billion euro market. Report by Markus Reher . ---------------------------------------------------------------------------------- Nearly everything runs automatically. From a giant crane glowing hot molten iron is poured into a ladle to be processed into steel. For Siemens engineer Anton Sebanz it remains completely fascinating. The ladle from Siemens has been at this plant in Ukraine since the beginning of the year. It's an investment worth billions, says Anton Sebanz. He is the Head of Sales, SiemensVAI Ukraine: "The amount of investment in Ukraine is very large. There is a huge need to modernize the steel mills to bring them up to international standards. And of course Siemens is represented here and naturally the competition is very intense." The plant in Alchevsk is considered one of the most modern in Ukraine. Siemens also delivered the control tower at the plant. It allows workers to control the entire steel-making process. From here Denis Lomakin and his colleagues produce batches of about 300 Tons of steel at a time. But right now the plant is operating at reduced capacity. Denis Lomakin: "We used to make 40 to 50 batches of molten steel per shift. Now it's 25 at the most. It's all because our orders have been reduced. Right now steel is just not in as much demand around the world as it is being produced." The new steel plant in Alchevsk unfortunately came online just as the global economic crisis hit. The company is hoping that the billion euro investment will give them an advantage over domestic and especially international competitors as they struggle to gain business during the recession. Igor Tokarew is Chief Engineer: "These days the mechanical applicapability of the steel plays a deciding factor. Mass-produced goods and production is no longer needed. That means in the future we will produce less steel but it will be of a higher quality--with the exact criteria demanded by our customers. It's the only way to survive the crisis." There's been a steel mill in Alchevsk for more than 100 years. The city is the center of heavy industry in Ukraine. Steel for ships and industrial production is sent from here to all over the world. And the livelihood of many of the some 100 thousand residents of the city is intimately connected to the steel plant. Denis Lomakin and his wife Tatjana are expecting a child. Both hope that he will be able to keep his job. Alchevsk as elsewhere in eastern Ukraine has already massive job cuts. Denis Lomakin has received special training for the new steel plant. Denik Lomakin is hoping that will mean his job is safe: "We realize that this isn't the first recession and won't be the last one. Recessions come and go--eventually this one will end as well. We cautiously optimistic." And Siemens has a similar attitude. Anton Sebanz is one of the company's sales reps for Ukraine. Understanding customers needs is the only thing that counts Sebanz says--not just during the economic crisis: "The steel production facilities in Ukraine are very, very complex. Most of them are very old plants, many were founded more than one hundred years ago. And the complexity and inter-related of the various facilities must constantly be kept in mind when conducting sales or offering solutions." The next stop for Anton Sebanz: Jenakijewe some 80 away from Alchevsk. The steel plant here was considered exemplary during Soviet times. Now it is in urgent need of modernisation and the company knows it. They want modern technology from the west--such as what Siemens has on offer. A new furnace will be built here able to deliver raw iron by 2010. And despite the crisis--construction work is going ahead. Juri Orobzew is renovatios supervisor. "The modernisation should have happened a long time ago", he says. "After the recession of 1998 here--the leadership at the steel plant changed--it eventually became part of a large holding group and we actually only recently got around to completely renovating everything here." The new blast furnace is just the beginning, much more is planned in Jenakijewe. Anton Sebanz is hoping for more orders for Siemens: "The mood is relatively positive. They are still optismistic here. Steel will be needed in the future. The only difference is that modernisation is happening at a slower pace--converting the steel plants into highly profitable, ecological plants is going to take more time." Anton Sebanz thinks Ukraine will continue to be a steel producer: the raw materials and the skilled workforce are available. The conditions are ideal as long as process of modernisation isn't derailed by the economic crisis.

DW-World | April 28, 2009

Tags:. .ladle. .molten. .steelworks. .igor. .ukrainian