Belarusian Metallurgical Plant steeled for global recovery

By bne IntelliNews October 29, 2009

Ben Aris in Minsk -

Steel prices have been hammered by the global economic crisis, which has hurt several Commonwealth of Independent States countries that depend on steel exports for money. But the Belarusian Metallurgical Plant (BMZ) has managed to shrug off the worst of the crisis thanks to the high quality of its products.

Stemcor, the largest independent steel trader in the world, has been working in the CIS since 1996 and with Minsk for more than 10 years. Alexandre Antadze, deputy director for the CIS, says Stemcor was surprised by the quality of the long-products (things like steel reinforcing bars used in construction), which BMZ specialises in. "We have been working in the Former Soviet Union for nearly 20 years and of all the mills we work with, the Belarusian Metallurgical Plant (BMZ) is certainly one of the best," says Alexandre Antadze, Stemcor's deputy director for the CIS.

The crisis has hurt the steel trade, with prices and volumes dropping by about a half over the last year. Stemcor trades about 20m tonnes of steel a year, of which BMZ accounts for a quarter of a tonne. But it's the quality, not the quantity, that counts - even in the current depressed markets, BMZ produced a total of 861,587 tonnes of steel in January-April, up by 4.3% on year, and a much better performance than its peers.

As the green shoots of recovery grow visibly higher, the steel business has also started to recover and Antadze says the crisis has come with a silver lining for Stemcor. "In the past, the steel mills from the FSU used to try and sell directly to clients or through their own trading arms. However, faced with continuously falling orders, they have been making more and more use of our services," says Antadze on the sidelines of the Belarus Finance and Investment Forum 2009, organised by the Belarus EU Business Council in Minsk at the end of October.

Foreign buit

Today, Belarus has a poor image in the rest of the world, dubbed by some as the last Stalinist state in the region. But this belies the positive legacy that communism bequeathed the country.

BMZ is the youngest steel mill in the CIS - only 25 years old - and was one of only two mills commissioned and built on a turnkey basis by a non-Soviet company - Austria's Voestalpine. "BMZ is one of the most modern mills in the FSU and the quality of their products is as good as it gets - compared not just to other mills in the CIS, but to any mill anywhere."

For example, a more recent addition to the plant's product line is steel tyre cord - the metal wires in car tyres that give the rubber its strength. A tricky product to produce for a very exacting set of customers, BMZ melts scrap and spins the metal into high-quality steel wire that it sells to all the world's leading tyre makers, including Michelin and Bridgestone. Likewise, the plant also converted one of its lines to produce seamless pipes that are used in the oil and gas transport business.

The plant also capitalises on its strategic location. Based in the Belarusian Gomel region, it can as easily export via the ports in the Baltic sea as it can from the ports in the Black Sea that serve eastern and western markets. On top of this are the excellent rail connections that link Belarus to the rest of Europe.

And the plant wants to build on its competitive advantages. Stemcor has already offered the plant several credit lines that were used to buy new equipment and introduce new products. But in the middle of October, the company sent out a letter to its 30 leading partners announcing that BMZ is planning to build a flat product mill. "This is a totally different kind of product and a very ambitious plan," says Antadze. "It will open up an entirely new set of customers to the plant."

The plant is already well plugged into the international markets and Antadze says it makes Stemcor work for its business. "It is very simple here: either you pay a good price and provide a good service, and then you get a regular supply, or the plant will look elsewhere," says Antadze. "They are very demanding in what they want, but once you have made an agreement, they are very reliable and methodical about delivering on the terms of the deal."

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