Evgeny Shilnikov, ELECTROSTAL Steel Works
Release Date: 2011-06-27
Evgeniy Shilnikov, General Director of Electrostal Steel Works, has been interviewed by Russianavia.net for a report on special metals, alloys and composites for the Russian aerospace industry to discuss the history of Electrostal Steel Works, its current challenges, modernization program and competitiveness strategy for the world markets.Mr. Shilnikov, what is today’s position of Electrostal Steel Works on the Russian market, and what are its main client industries?
Electrostal Steel Works was launched in 1917 for production of a wide range of steels for different industries. Today, we have developed production of more than 2,000 types of steels and alloys – from press forgings to flywire, sheets and strap.
We have more than 2,000 customer companies among the players of aerospace industry, energy and chemical industry, engine manufacturers. In spite of the fact that Electrostal is a relatively small company as compared to the metallurgical giants, we cover about 70-80% of the total volume of heat resistant alloy production in Russia.
Electrostal Steel Works was constructed on the eve of industrialization, and its capacity was defined by the needs and prospects of the Soviet special steels industry. Nevertheless, even at that period its facilities were not loaded at the top of their capacity. To provide workload for machine tools with a constant production cycle, Electrostal had to include loss-making manufacturing in its production plan – mainly construction steels ShKh(ШХ)-15 and 35GS(ГС). Almost a century later, the 2008 crisis led to a slump in demand and prices of construction steels, the losses for its production grew, making it evident that further production of construction steels was unreasonable.
We realized that the end of the crisis would be marked with tough competition among the metallurgists. It was necessary to reduce the volume of unprofitable products, expand the production of special steels and develop new products. To make it happen, it was necessary to overhaul the facilities. Soon after that, in 2009, we started working at the modernization program.
At what stage is the modernization program today?
Today, we have settled all technological issues, selected the equipment and arranged contracts for its production, assemble and setup, and opened credit lines for the entire program.
In 2010, we started the first stage – installation of high speed 1,600 t press that will replace the old radial forging machine bought in early 1970ies in Austria, and air hammers. We are currently assembling reheat furnaces and building the foundation of the press. End of first stage and launch of the press are planned before the end of 2011.
Does machine tools replacement program envisage production of added value?
The modernization is not only aimed at increasing the output and expanding the product mix. At the end of the day, part of the equipment supplied in the Soviet times can provide the necessary productivity and sufficiently high quality. An important part of our plan is the human factor.
When I came to work at Electrostal Steel Works, I was used to the condition of technology and equipment, of production and methods of work of those times. A guy who will come to work at the same workshop today will estimate the same parameters through other eyes. What I mean is that the level of quality that we can provide today should be improved in terms of the relations of the machine tools and their operators. Unless we choose modernization to attract people interested in a more intellectual work with a smaller physical component, we will have to hire cheaper and less qualified workforce. Because our task is to level up the work with the requirements of the time, we are talking about modernization.
Obviously, we need not forget the financial returns of our work because we are liable to return the attracted funds. Namely, maintenance of the radial forging machine that I had mentioned in my previous answer requires buying spare parts worth nearly US$1.4 million per year. Installation of newer equipment will allow us compensate the costs of the spare parts.
By all means, we consider taking on production of metals with higher added value. Given that the program for support of the metallurgical industry adopted by the Russian government will provide larger output of special products, we have no intention of squeezing anyone out of this market because there will be enough work for everyone. Even if we potentially become a new competitor on the market of metals with higher added value, it will be a win-win situation: on the one hand, healthy competition is good, on the other hand, we will continue our supplies to our clients who produce metals with higher added value even if Electrostal Steel Works installs its own equipment for this type of production.
Why is it important for Electrostal to certify its products according to international standards?
Russia is part of the international community. One of the necessary elements of successful integration is to complete certification. It will be easier to do that if we use world level equipment with modern technologies. If we order the same equipment in Russia, this gives the world community a formal reason to refuse us with international certification because the unknown equipment has no track record.
However, talks with our foreign partners made me feel that no one is really waiting for our hi-tech products on the world market, although they do admit that Electrostal can supply its products to some segments. As a result, when we buy foreign machine tool brands, we say straight ahead that the software supplied with these machine tools should be adjusted to the steel and alloy deformation regimes that we plan to produce so that we our metals are compliant with the EU standards.
In spite of a small export share, you are making strong efforts to increase Electrostal’s competitiveness on the world market. Does Electrostal Steel Works consider prospective entry on the Asian market, where the technologies are still behind Russia?
Our priority is to develop hi-tech industries in Russia for successful competition on the world market. We must provide the Russian industries with highest quality metals that exceed their European and Asian analogs. All the Russian aviation and defense products should be made from Russian metals. Electrostal has successfully completed certification according to the Aviation Register of Metal Products for the new generation Sukhoi RRG-100 aircraft and is now an authorized supplier of metal roll under this state program for the next three years.
As for the Asian markets, I should note their differentiation. China is developing and has very rich natural resources and a huge industrial potential. Today, China is one of the largest manufacturers of standard steel types but it is behind in developing production of special steels and alloys. We could possibly fill this niche but it is much more reasonable for Russia to export end products for hi-tech industries in Asia.
Mr. Shilnikov, how do you see the prospects of Electrostal Steel Works, one of the key players of the Russian special steels industry, in the short term and in the long term?
We have a very confident outlook. All the forecasts and the plans envisaged by state modernization programs and development programs for hi-tech industries indicate future growth of demand for special steels and alloys. As for the technological overhaul program that we plan to finish in 2-3 years, it will allow Electrostal take the leading position in production of special steels and alloys and semi products. Hence, in some five years I will be ready to tell you about our further plans for development of Electrostal Steel Works.
| Company: | ELECTROSTAL Steel Works |
| Position: | General Director |
| Country: | Russian Federation |