ArcelorMittal's safety investment paying off

By bne IntelliNews April 28, 2011

Christopher Pala in Washington -

Over $340m and three years into its programme to cut coal-mining fatalities to zero in five years, ArcelorMittal Kazakhstan is finding that the accidents which had turned the steelmaker into a magnet for controversy have fallen significantly.

The number of accidents in 2010 fell to 64, compared with 81 in 2009 and 179 in 2008; fatalities dropped from 42 to 7 in the same period. About 11,000 of the company's 40,000 employees work underground in mines made dangerous by methane deposits. "This shows we're taking the right measures," says Frank Pannier, CEO of the Kazakhstani unit of the world's largest steelmaker.

That's certainly a sign things are moving in the right direction and will be a relief to a company that was forced into action after an explosion at the Lenina mine, which is southeast of the capital Astana, killed 41 people in September 2006, which brought the staff out on strike. After another explosion at its Abaiskaya mine killed 30 workers in 2008, Kazakhstan's government publicly threatened the company with pulling its license to operate if it did not improve safety. At the time, President Nursultan Nazarbayev, who began his career at the age of 20 at the steel plant when it was inaugurated in 1960 and worked there for several years, was deeply upset, according to a source who quoted his confidants.

A sorry history

Pannier says 2,548 people have died in accidents, mostly as a result of methane explosions, from the time the complex was built south of Astana in 1945, an average of 50 a year. Since ArcelorMittal bought the complex of eight coalmines and two mills in 1996, a total of 217 coalminers have died, which is still an average of 14 a year. The high casualty rate is largely due to the fact that ArcelorMittal's coal runs mostly at depths between 2,600 feet and 3,200 feet. That's very deep in comparison to other coalmining conditions worldwide. The coal seams are also some of the gassiest in the world, containing pockets of methane under pressure that are difficult to detect, says methane expert Clark Talkington. In contrast, for the rest of the Kazakhstani coal industry, which provides 80% of the country's energy, open-air strip-mining is the norm.

In July 2008, the company embarked on a plan to eliminate methane explosions that combined staff training and the importation of state-of-the-art gas detection, ventilation equipment and world-class degassing techniques. The investment to improve safety at coalmines is undertaken in addition to a $1bn programme to raise its output of steel from 4m to 6m tonnes by 2015. The European Bank for Reconstruction and Development granted a $100m loan for the safety programme.

The programme for degassing is all about removing as much methane as possible out of the mine before production begins and removing the rest during the mining process, Pannier explains. Degassing holes of varying diameters are drilled across the production unit in the coal seam and through the roof of the extracted area to capture the methane, which is brought up by suction pumps on the surface. "What we're doing is doubling the number of ventilation wells," says Pannier. "We also are installing more effective ventilation and degassing equipment and more sophisticated equipment to detect gases."

A native of Dessau in Germany who has worked at steel and mining companies in Germany, Ukraine and Kazakhstan, Pannier descreibes eliminating mortality from Temirtau's eight mines as "one of the most challenging" jobs of his career. "Many studies have shown that not all risks can be eliminated, but we can apply practices which mitigate this risk," he says.

Talkington, a methane expert who is a senior vice president at Sindicatum Carbon Americas, agrees that ArcelorMittal's mines are among the most difficult in the world. "Management is clearly committed to improving safety, and I think they should be able to achieve that by bringing in the latest degassing technology developed in Australia and the United States and adapting it to the local conditions," he says.

Though the worldwide recession has cut into the profits of the world's largest steelmaker, the Temirtau operation, luckily, "is very cost-effective," says Pannier. "We're working at full capacity, we have captive iron, coal and energy and we even managed to turn a profit in 2009," he says.

This year, steel output will be increased by 17% to 3.9m tonnes as demand bounces back, he said.

There's also hope of actually extracting a profit from the methane as well: in two of the mines, it's captured and used for heating, and an experimental 2-megawatt (MW) power station is being tested. If the technology proves successful, the company could use the methane to power a 50-MW plant to replace that amount of power the company now purchases from the grid, Pannier says.

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