Alexander Romanov, Russian Union of Metal and Steel Suppliers
Release Date: 2011-02-17Alexander Romanov, Head of Russian Union of Metal and Steel Suppliers, has been interviewed by Russianavia.net to discuss the activities of RUMSS, the current trends on the Russian market of special metals and alloys and its future prospects.
Mr. Romanov, could you introduce us to the background of the Russian Union of Metal Product Suppliers?
The idea behind the Russian Union of Metal Product Suppliers (RSPM) was to establish a new, multifaceted platform to support the metal suppliers industry. As a matter of fact, companies in the Soviet Union were very much used to the support of the related Ministries and state agencies, and the latter were drastically reduced after USSR collapsed. A lot of smaller industrial unions appeared in 1990ies but many of them were purely formal institutions linked to the prominent people who used to be high-ranked government officials. However, some of these unions had a more pragmatic approach and were driven to develop and implement real business solutions. When RSPM appeared in 1997, we wanted to unite all the Russian suppliers of metal products to enable them to communicate, discuss the current problems and find new partners.
What importance does the Russian aviation and aerospace industry represent for the metallurgical sector today?
Aviation and aerospace represent high technologies that will drive the continued development of other industries such as machinebuilding, for instance. The current projects developed in the Russian aviation and defense sectors – Sukhoi Superjet, PAK FA, MS-21 – witness the changes and the growing needs of the industry which will also help to develop the Russian economy.
Back in the USSR, almost all the civil and military jets flying above the territory of the Soviet Union and other Comecon countries were produced in Russia. Strong military aviation defines the defense potential of any country. As you understand, developed military aviation requires developed metal industry. Such a scale of production required enormous capabilities from the industry which responded by constructing numerous aviation facilities all over the Soviet Union, as well as plants producing spare parts and aluminum products. To name a few of the latter, I mean KUMZ (part of Aluminum Products – Editor’s Notes), KraMZ (now part of En+ Downstream – Editor’s Notes), Samara Metallurgical Works (SMZ), Belaya Kalitva Metallurgical Works (acquired by Alcoa (U.S.) in 2005 – Editor’s Notes), Stupino Metallurgical Works, In essence, Alcoa Rus and Aluminum Products now play the key parts as the suppliers of both the Russian civil and military aviation and the international aviation market.
Today, civil aviation faces a dilemma because the fleet of the Russian airlines is mainly outdated. Is it worth paying USD 50 mln to buy a foreign jet or is it worth investing in launching Russian-based production? I believe that as soon as the industry comes up with its requirements for the coming years in terms of the volume of raw and the production capacity, the industry will be able to react and construct the necessary facilities. For instance, the new project of constructing a new cold rolling mill at KUMZ (In January 2011, KUMZ announced a tender for development and construction of a cold rolling workshop inviting duly qualified Russian and international companies to bid – Editor’s Notes) witnesses the readiness of the manufacturing industry to support the Russian aviation projects.
Talking about the demands of the industry, in March 2010 Alexey Fedorov, ex-President of UAC, urged Igor Shuvalov, First Vice Prime Minister of Russia, and Igor Sechin, Vice Prime Minister of Russia, to consider the predicted shortage of aluminum. Fedorov insisted that by 2015 aluminum demand in the Russian aviation sector would rise to 5,500 t of aluminum per year. Does that look feasible in your view and who would need to invest – the state or the industry?
Basically, Fedorov was right to warn the government because Russia needs an aviation shield to be protected from external threats. This shield, figuratively speaking, is the industry that supplies civil and military aviation, the national military might. One of the largest metallurgical companies that is taking a lot of steps in this direction is Rusal. Its two main divisions located in the Urals and in the European part of Russia produce about 4 mln t of primary aluminum. This structure is especially advantageous when it comes to exporting products. Obviously, Rusal’s main export markets are China (consumes 18% of aluminum for transport industry and 28% of aluminum for construction) and Western Europe (31% and 21% respectively). Rusal’s planned opening of Boguchansky and Taishet smelters will add another 1.2 mln t of aluminum to their production volumes.
Apparently, China has been developing its metallurgical facilities since 2004 but the quality is yet to reach the world level… Is China more of a threat or an opportunity?
Poorer quality and enormous demand explain their importing appetites. Although Russia is China’s number one supplier, the Russian metallurgists should not forget that China might sooner or later pull this chair from under Russia’s feet because they have an incredible capacity to develop and catch up in terms of quality. China is growing very quickly; they are developing their construction industry, aviation, power engineering, etc. At some point, every one of the billion people living there will want to take a plane and fly somewhere! Nevertheless, Russia has more resources, better facilities and stronger power generation, especially with all the hydro power plants in the Far East. Moreover, China does not have enough technologies to produce semi-products. Thus, for the moment it is more feasible for them to import primary and secondary aluminum, as well as titanium from Russia, and that makes China a very big market of opportunities. That is why Rusal has chosen the right strategy. Its future strategy will consist in cooperating with manufacturers of more value-added products. Bearing this in mind, I would say that Fedorov has expressed realistic optimism.
Obviously, the value chain in the Russian metallurgical industry is very long. Will there be enough space for smaller companies as the source of technology?
Again, given that the aviation industry declares good demand for metals, the metallurgists will need new equipment and high technologies. This is what can pull the smaller players in. Their future is in development of hi-tech alloys and other value-added products. The value chain is indeed very long because apart from aluminum, aircraft manufacturers need heat resistant steels for the engines and composites to reduce the weight of the aircraft.
Talking about composites, are they real competitors for the more traditional aluminum? Is there a notion of competition among the metals?
Composites are mainly regarded as aluminum’s alternative in the aerospace industry because composites are less heavy and just as durable. Aluminum is now being promoted in construction and in railway transport. To give you an example, the U.S. use a new type of aluminum railway car that weighs less and has a better cargo capacity as compared to steel cars. After a special aluminum promotion program was launched in Russia, KUMZ made a test sample of a similar semi-car. Russia and the U.S. are similar in terms of a distance. That is why the Russian industry is interested in this innovation.
As for the construction industry, the problem in Russia is that there are no technical standards and regulations of applying aluminum in construction because Russia was always more used to applying wood. Now, Rusal volunteered to develop the missing standards and requirements to streamline the usage of aluminum for construction. This might seem a strange kind of activity for Rusal but when you realize that this standardization triggers larger consumption of aluminum in construction which promotes larger demand for aluminum semi-products, this becomes logical.
|Company:||Russian Union of Metal and Steel Suppliers|