Russia's Special Metals, Alloys & Composites for Aerospace, Focus Communication
Release Date: 2011-10-20 00:00:00Russia's Special Metals, Alloys & Composites for Aerospace
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Historically, quality and R&D in the Russian metallurgy industry was driven by the civil aviation and military sectors. Essentially all civil and military jets occupying Soviet Union and Comecon country airspace were produced in Russia with technological innovations and new materials traditionally reserved for the military industry. Today, however, there are clear signs that a new wave of value-added production is emerging amongst developers and manufacturers for civil aviation and new aerospace projects.
Alexander Romanov, president of the Russian Union of Metal and Steel Suppliers (RUMSS), is confident that Russia has the resources, opportunities, and unique growth potential to develop value-creating downstream operations. “Aviation and aerospace represent high technologies that will drive the continued development of other industries such as machine building and composite materials. The current projects developed in the Russian aviation and defense sectors – Sukhoi Superjet, PAK FA, MS-21, and the black wing project involving composite materials for construction of civil aircraft – are witnessing the changes and growing needs of the industry which will consequently help develop the Russian economy.”
Modernization in special metallurgy (comprising the manufacturers and developers of special metals and alloys) and composite industry (the manufacturers and developers of carbon fibers, prepregs and composite materials), together with integrated solutions from industrial software and machine tool vendors, are expected to increase production capacities and product qualities while broadening the range of industries that consume aluminum and new materials. The use of carbon fiber, for example, was traditionally limited to special industries such as aerospace and defense. According to Viktor Avdeev, general director of Unichimtek, the Soviet Union was one of the top three carbon fiber consuming countries in the world alongside the U.S. and Japan. Today, the aviation industry consumes hundreds of tons of carbon fiber per annum while the automotive industry is capable of consuming dozens of millions more. “Whoever has carbon fiber and modern technologies has a unique position in special materials and special equipment,” he adds. Composite Holding Company, eager to corner the market for composite materials in Russia, is constructing and modernizing its facilities to expand carbon fiber production and offer larger volumes of civil products. “To make composites the present of Russian strategic industries, we need to increase our competencies and create strong integrated companies and technologies,” comments Vladimir Khlebnikov, Composite Holding Company’s deputy general director.
Currently, Russian aviation is developing in accordance with the approved Federal Program, “Development of Russian civil aviation for 2002-2012 and through 2015”. Specifically, United Aircraft Corporation (UAC) plans to produce approximately 360 jets by 2015 generating an income of 320 billion rubles ($10 billion). However, according to Evgeniy Kablov, general director of VIAM (the Russian Institute for Aviation Materials), in his March 22, 2010 message to the Russian Ministry of Industry and Trade, “annual consumption of aluminum roll in Russia will grow from 12,000 tons in 2010 to 19,000 tons by 2020.” Former UAC president Alexey Fedorov predicts that by 2015 the Russia’s aviation sector will consume slightly below 5,500 tons of aluminum per year.
“Unless we modernize the available facilities and construct new ones, very soon we will be unable to competitively produce for Russian aircraft manufacturers who themselves are competing with Airbus and Boeing. Beyond raw materials, Russia is interested in selling aircrafts and equipment,” says Natalia Vasilenko, director of En+ Downstream, one of the top four manufacturers of aluminum products in Russia.
While there is a clear need for metal companies to invest in supplying the aviation industry, essential to the process, as many players agree, are efficient cross-sector cooperation and, most importantly, mutual understanding between business and government. Joint efforts between metallurgists; aluminum, titanium and special steels producers; composite producers; software vendors; and integrators of brand new engineering solutions will not go far without the support, as Russian say, “from above,” – state decision makers who regulate imports, provide technological platforms to engage business and science, and create a comfortable environment for manufacturers to invest in modernization with confidence.
In 2008, former prime minister Viktor Zubkov, promoted the need to provide state support for the special steels and alloys industry in order to pursue technical modernization. The repeated calls for innovation and modernization have resulted in a number of orders issued from 2008 - 2010 by Igor Sechin, deputy prime minister of Russia; Vladimir Putin, prime minister of Russia; and Viktor Zubkov, first deputy prime minister of Russia, for developing metallurgy between 2009-2011. They envisage increasing exports of metal equipment and high value added metal products; expanding the range of metal, forge-and-press, special steel, and alloy products listed as high added; simplifying procedures used by exporters to confirm timely tax payments; and subsidizing Russian heavy machine building companies loans taken out from 2009 - 2010 for modernization of value added production equipment. The government also encouraged investments by exempting new metallurgical facilities from taxation for three years after their commissioning and reducing taxes for innovative metallurgical equipment.
Modernization requires better quality which opens new opportunities for metal producers and novel ways of integrating composite materials in airframes made of traditional aluminum – “flying metal,” as it is poetically referred to in Russian. Traditional aluminum has no direct alternatives yet, although composites offer unique capacities in weight reduction and improved durability. In financial terms, Evgeny Romanov, general director of RT-Metallurgy, notes that at current fuel prices, every fifth flight is for free. This represents an attractive alternative, but realistically it is a journey of a thousand li. Eventually, all doubts voiced by the industry boil down to the expectations of demand for products, solutions, and equipment. At the same time, major players realize that waiting for the demand is the best way to lose it, according En+ Downstream director Natalia Vasilenko.
Alexander Romanov, president of RUMSS, believes that civil aviation in Russia is facing a dilemma: is it more worthwhile to pay $50 million for a foreign jet or invest in launching Russian-based production to replace an outdated fleet? “As soon as aircraft manufacturers come up with their requirements for the coming years for volumes of raw materials and production capacities, the metallurgical industry will be able to construct the necessary facilities,” he comments.
The major investment projects of the key suppliers to the aerospace industry which are aimed at modernization and increasing product range, illustrate the readiness of the manufacturing industry to boost both output and competitiveness, locally and on the external markets, in support of Russian aviation projects.
VSMPO-AVISMA, the world’s largest titanium producer, plans to invest up to $250 million to develop production in 2011, equivalent to half of all investments in modernization planned between 2011-2015.
En+ Downstream (aluminum semi product manufacturer formed on the basis of Krasnoyarsk Metallurgical Plant, KraMZ, and DOZAKL) is working on its key investment projects – the world’s largest rolling facility initially, evaluated at $350 million and increased to $500 million after deciding to expand its products range through additional equipment installation.
Kamensk Uralsky Metallurgical Works (KUMZ), Russia’s largest manufacturer of aluminum semi products, is undertaking mass-scale investments to construct new facilities and overhaul key equipment and technologies prompting chairman Vladimir Skornyakov to describe the current period as a “rebirth” for the corporation. In early 2010 KUMZ’s Board of Directors approved the new version of its Strategic Development Program through 2015. The company aims to become a Russian and European leader in high quality aluminum alloy products whereby reducing its share of semi-products and strongly increasing its share of ready-made products.
KUMZ: growth in 2010 and high investment targets for 2011
In terms of its production, technological basis, and intellectual resources, Kamensk-Uralsk Metallurgical Works (KUMZ) has historically partnered with the leading hi-tech manufacturers in the aviation, aerospace, nuclear, oil and gas, shipbuilding, and construction industries.
As managing director Alexey Filippov summarized when presenting 2010 results at a general shareholders meeting in April 2011, KUMZ’s strategic priority is to strengthen its focus on hi-tech industries which will be supported by investments in facility overhaul.
With commodity production volume growing 30% from 2009 levels, 2010 was the most successful year for KUMZ in the last 15 years. KUMZ has established long-term partnerships with the leading international aerospace companies and strategic Russian customers and distributors. Its strong positioning in Russia, Europe, and the US is complemented by expansion in Asia Pacific. According to Filippov, the market continues to show stable recovery.
KUMZ is pursuing product certification and manufacturing in cooperation with its Russian and foreign partners. To meet the high standards of its aviation customers, KUMZ is also upgrading its production and sales principles to target multiple industries.
Investments in modernization in 2010 exceeded 380 million rubles. KUMZ commenced modernization of 120 million and 300 million presses which will increase forging production for aviation and transport. The new smelting and foundry shop will cover the existing and potential needs of the processing industries.
In 2010, KUMZ developed and implemented over 350 new products and made improvements aimed at technology and productivity. Production of slabs from 7000 alloys for aviation has been certified, approved, and commissioned.
The company is plans to increase sales and production volumes in 2011 through a cost reduction program which targets certain yield ratios and energy savings. Its 2011 investment program is expected to be 3.4 times higher than 2010.
Alcoa, the second largest aluminum products manufacturer in Russia, has invested more than $500 million from 2005-2010 in facility upgrades for Alcoa Belaya Kalitva – one of Russia's largest fabricated aluminum facilities – and Samara Metallurgical Plant (currently ZAO Alcoa SMZ) – in order to improve product quality and raise production efficiencies to the required standards of its foreign and domestic customers.
Stupino Metallurgical Company (SMK), a steel, aluminum and heat resistant metal products specialist, lists its 2011-2013 investment strategy as a current priority, particularly investments aimed at quality improvements for its aluminum product group. Moreover, SMK is part of the state investment program for development, reconstruction and organization of production, strategic, rare and import replacing materials for the defense industry and special equipment for 2009-2011 and through 2015. The investment program aims to improve aviation equipment to required levels by 2015-2020.
Electrostal Steel Works, manufacturer of over 2,000 types of steel and alloys, underwent a modernization program in 2009 and installed a high speed 1.6 ton press in 2010 to replace its radial forging machine bought in the early 1970s in Austria. The end of first stage and commissioning of the press are planned before the end of 2011.
Modernization is not only about investments in equipment and facilities and development of new standards; it also encompasses increasing efficiency through investments in lean production. SOLVER is one of the first engineering companies in Russia that came up with solutions for machinebuilding companies to implement lean production.
Radislav Birbraer, General Director of SOLVER: I’m convinced that Russia should capitalize on innovations
SOLVER has adopted the concept of engineering consulting. Can you characterize its advantages for Russian machine building?
As a product, engineering consulting is a set of microsurgery methods to operate on a sophisticated system of production in Russia with unhealthy technologies. While this surgery is evolving, there is still much room for competition, but not many competitors yet.
SOLVER adapts products and implements with various Russian industrial companies. What leads these partner companies to choose SOLVER?
Very often, new technologies are not supported by old business processes. When this is the case there are two solutions: either to outsource processes and sell equipment, which we have encountered in our practice, or create new auxiliary processes. If you are considering the second scenario, then you are talking to the right person. You can of course seek the services of other companies, but it is important to remember that building new business processes is not among the core competences of production experts.
SOLVER is a service provider that is ready to form new business processes that support technology suppliers. Companies engage us to align their new technologies with business processes that we formulate and implement. Additionally, we are able and ready to monitor future deviations from normal processes.
How do these business processes respond to the main needs of Russian industries? Furthermore, how do your products promote modernization add value?
First of all, we have explored the common problems that companies face when trying to increase efficiency and competitiveness. There are three main criteria to assess a company’s market position: length of production cycle, product quality levels, and production costs. Each of our products in engineering consulting targets improvement in each of the three criteria so that a company can form profitable market prices. Our ultimate objective is profit growth. In each single case we analyze existing production while offering and implementing new production solutions to help our clients reach their targets on time, within cost, and with high quality. It is this process that unites projects across different industries.
Russian titanium: made in Russia for the whole world
Over a decade ago, VSMPO-AVISMA assumed its niche as a reliable supplier of highest quality titanium products with added value for international markets. Today, AVISMA’s quality is recognized by over a thousand customers in Russia such as United Aircraft Corporation (UAC) and its member companies Sukhoi Civil Aircraft; Aviastar-SP; Voronezh Aviation Plant (VASO); Irkut Corporation; KnAAPO; Perm Motors, as well as Tactical Missiles Corporation, Sevmash and more than 300 partners worldwide including aerospace corporations Boeing; Airbus; Safran (France); Rolls-Royce (UK); Honeywell; General Electric; Pratt & Whitney (U.S.) and Embraer (Brazil). Beyond a breadth of partnerships, VSMPO-AVISMA has a depth of titanium supply for core customers: Boeing covers 30—40% of its titanium demands through VSMPO-AVISMA; Airbus approximately 60%; and Embraer as much as 100%. This creates a good environment for long-term strategic agreements such as AVISMA’s contract with Boeing until 2015 and with Airbus through 2020.
Today, VSMPO-AVISMA exports about 70% of its titanium, mainly for Boeing and Airbus.
As a main supplier of titanium products for the Russian aerospace, shipbuilding, defense and petrochemical industries, VSMPO-AVISMA is a strong partner in the construction of new generation jets with the leading international aviation companies. In 2009, AVISMA opened Ural Boeing Manufacturing (UBM) - a joint venture between Boeing and AVISMA to process titanium forgings for the new Boeing 787. Ural Boeing Manufacturing is also prospecting to construct end products.
MAG Russia: comprehensive industrial solutions and equipment for VSMPO-AVISMA and Titanium Valley
One of UBM’s strongest partners is MAG Russia – the Russian branch of the global machine tools manufacturer and industrial solutions provider for complex aluminum, titanium, and composite processing. Within the framework of Ural Boeing Manufacturing and AVISMA’s titanium landing gear leg production, MAG supplies technologies and equipment for production of aluminum products and composites. MAG machines provide critical manufacturing capacity to the Landing Gear Manufacturing Center of Excellence in Verkhnyaya Salda, Russia, for production of titanium components for the Boeing 787 Dreamliner and Boeing 777.
MAG Russia offers comprehensive industrial solutions for aluminum, titanium, and composite processing for Russian aerospace companies. Correspondingly, MAG Russia provides full turnkey solutions for the production of aircraft components, entire fleets, and their full range of equipment from jobshops for private companies to large-scale hi-tech facilities, according to its president Sergey Gerasimov.
Price is an important determinant of the competitiveness of foreign equipment on the Russian market. Although MAG’s hi-tech equipment is an expensive option for customers, its value and results typically pay off. “The main criterion is final production cost,” explains Gerasimov. “To help our customers efficiently use hi-tech equipment – with at least 80% capability – our software product, Freedom e-log, fully controls production facilities at all levels – from engineers to the CEO who is interested in knowing production costs. This system helps to develop production and improve the productivity of the entire company.”
Part of MAG’s strategy in Russia, according to Gerasimov, is to cooperate with engineering companies and software vendors offering ready-made solutions. Some of MAG’s international partners include Vistagy and Gemcor. A key partner in Russia amongst its network of integrated software solution providers is SOLVER. “Offering comprehensive solutions, we attract different suppliers from the aerospace, automotive, and wind energy industries,” Gerasimov comments. On the Russian market, MAG’s main prospects are for participation in joint projects, localization of production, and expansion its market share. In particular, MAG opened a local service department at VSMPO-AVISMA to train specialists and control the work of its equipment on a daily basis.
MAG and VSMPO-AVISMA recently reached an agreement, approved by the governor of Sverdlovsk region, for technological servicing of MAG’s unique equipment for the Titanium Valley.
According to Mikhail Voevodin, CEO of VSMPO-AVISMA, the company is currently focusing on establishing a special economic zone (SEZ) in Verkhnaya Salda called Titanium Valley in conjunction with the federal authorities to manufacture titanium and aluminum alloy products for the domestic and foreign machine-building industry. “Hopefully, this SEZ will help to implement a few proposals from our partners and customers who are willing to establish joint ventures there,” notes Voevodin.
The likely investors in Titanium Valley are companies that are willing to purchase AVISMA’s non-core assets as well as suppliers interested in shifting production to facilities closer to Verkhnaya Salda. The SEZ offers the advantages of lower rates on profit and property taxes and possible government subsidies on infrastructure. It is also very important that equipment in the SEZ is free of custom duties and VAT. However, Mikhail Voevodin stresses that “AVISMA will not get the fiscal and customs benefits of the special economic zone.”
Titanium Valley was officially approved in November 2010 by prime minister Putin. Putin had previously visited several metallurgical facilities in the Urals, Russia’s industrial core, including VSMPO-AVISMA, Russia’s monopoly company in titanium manufacturing and supplier to some of the world’s largest aviation companies.
Construction for Titanium Valley infrastructure will commence in 2011 with funds for general development to appear in the 2012 federal budget. The Russian government, however, hopes to see investors bring fixed assets worth EUR 1 billion for the first stages of the project. According to Voevodin, VSMPO-AVISMA is ready to invest up to $150 million in Titanium Valley. Russian Technologies, the state corporation for development, production and exports of hi-tech products, is expected to invite AVISMA’s and Boeing’s partners Goodrich and Rolls-Royce, as well as companies representing the shipbuilding, petrochemical, nuclear and medical industries to Titanium Valley.
In March 2011, VSMPO-AVISMA organized a mission to Yekaterinburg to discuss Titanium Valley developments between Alexander Misharin, governor of Sverdlovsk region, and Mikhail Voevodin, CEO of VSMPO-AVISMA. Members of the mission included Raymond Conner, VP and general manager for supply chain and operations of Boeing Civil Aircraft; John Byrne, director for aviation materials and constructions supply chain of Boeing Civil Aircraft; and Sergey Kravchenko, Boeing regional director for Russia and CIS. “One of the conditions for choosing Verkhnaya Salda was the presence of Ural Boeing Manufacturing, a joint venture that proved that this region was a perfect match for a special economic zone,” said Misharin. Conner noted that “Sverdlovsk region represents a favorable business climate for our joint venture and we hope to further develop our cooperation with VSMPO and Yekaterinburg authorities.”
According to Voevodin, VSMPO-AVISMA is committed to continue developing its production chain in Titanium Valley for higher added value products such as final machining or component assembly. Added value products are key for VSMPO-AVISMA to gain strong competitive advantages over other titanium manufacturers such as China. According to experts, world titanium manufacturers will see significant competition from China over the long term. Despite current low quality levels of Chinese manufactured titanium – a strong driver for Russian titanium on global markets – China is increasing its competitiveness in industrial titanium markets. Voevodin assesses that China will become a dangerous competitor in 2-3 years and will start production of aerospace titanium within 10 years.
Currently, China, Korea, and other Asia-Pacific countries are the largest consumers of titanium products. To procure potential partners and maintain relations with its current clients, VSMPO-AVISMA opened VSMPO-Tirus (Beijing) Metallic Materials Ltd., its daughter company in China, in May 2011. VSMPO-Tirus’s offices and warehouses will be located within a free economic zone in Tianjin province.
Mikhail Voevodin, CEO of VSMPO-AVISMA: our main priority is our customers
Over a decade ago, VSMPO-AVISMA assumed its niche as a reliable supplier of highest quality titanium products with added value for international markets. Today, VSMPO-AVISMA’s quality is recognized by over a thousand customers in Russia and more than 300 partners worldwide.
For VSMPO-Avisma, 2009 and 2010 were marked by two significant events: a joint venture with Boeing and the first long-term delivery contract with EADS. Which of these events is the most important for you?
Traditionally, our main priority is to keep our customers happy. We understand that customers are increasingly interested in shorter supply chains and are mostly interested in the price of the final part. This is a new global trend. VSMPO-Avisma is more interested in joint ventures as an opportunity to produce a more developed commercial product; this is proven by the experience of our joint venture with Boeing. For customers who are not interested in joint ventures, VSMPO-Avisma has in-house production facilities.
VSMPO-Avisma welcomes any kind of new joint ventures. Our current focus is establishing a special economic zone (SEZ) in Verkhnaya Salda. Hopefully, this SEZ will help to implement a few proposals from our partners and customers who are willing to establish joint ventures. Strategically, we have already received a preliminary approval from the regional government.
What would be the advantages of the special economic zone in attracting companies?
There are many, such as lower rates on profit and property taxes and possible government subsidies for infrastructure. It is also very important that equipment in the SEZ is free of custom duties and VAT.
VSMPO’s investment program is kick-starting again with a surprising swing…
Originally, the investment program started in 2006 with the idea of increasing VSMPO’s production capacity by 60% and changing the product line from easy products to more developed ones in order to double turnover and EBITDA in 2012. Investment money earmarked for 2006-2012 totaled $1 billion. Despite the financial crisis that began in 2008, we did not suspend the investment program but only postponed its final date to 2013; otherwise we would have not been ready for the ramp up of our customers.
Most of your strategic acquisitions have covered so far mostly Russia and Ukraine. Is any change planned towards diversifying the geographic location?
Our latest acquisition in Russia is Uralmet, a major super-alloy producer. It was the right decision because the major issue for super-alloys is quality. We would like to improve the already high quality of Uralmet products and use super-alloys for rotor blades and for export. Hopefully in the future this acquisition will enable us to arrange cost-cutting production in super-alloys.
VSMPO is now partly owned by Russian Technologies. Why was it important to get into Russian Technologies and what has it brought?
In 2006, Rosoboronexport, now part of Russian Technologies, acquired the shares of VSMPO as a strategic enterprise and as the only Russian titanium producer for defense and military equipment. I must confess that the four years with Russian Technologies have been quite beneficial for VSMPO-AVISMA.
Demand for aluminum in Russia: ‘if we wait for it, we’ll lose it’
The Russian market is seeing increasing demand for aluminum products and, consequently, facility workload. Natalia Vasilenko, director of En+ Downstream states that “the demand for aluminum products in Russia in 2010 grew about 40%, according to our estimations, whereas aluminum consumption per capita is still very low in Russia as compared to America, China or Europe; but the potential for further growth is great.” In general, increasing demand for aluminum remains one of the key challenges in 2011 for the Russian industry.
Will aviation manufacturers live up to their promises?
According to Aviation Explorer, a March 2010 forecast sent from Alexey Fedorov, ex-president of UAC, to Igor Shuvalov, first deputy prime minister of Russia, and Igor Sechin, deputy prime minister of Russia, projected that by 2015 the Russian aviation sector will be short of approximately 5,500 tons of aluminum per year. Similar concerns have been officially filed to the Russian government by Alexander Misharin, governor of Sverdlovsk region, and Evgeniy Kablov, general director of VIAM (the Russian Institute for Aviation Materials). Both Fedorov and Kablov believe that the current available stocks at Russian metallurgical facilities are not sufficient to implement the Program which could result in aluminum shortages by 2015. At the same time, Alexander Romanov, president of the Russian Union of Metal and Steel Suppliers, believes that sufficiently stocked facilities can be constructed upon industry voicing its concerns and that sufficient demand does not equate to the entire production being directed to the domestic market. Regardless, the main suppliers of aluminum products for Russian aviation remain uncertain about the eventual outcome of the announced aviation program.
According to Anatoly Zharov, general director of Stupino Metallurgical Company, the threat of aluminum shortages is more closely linked to its new uses for railways and construction. “I share the general feeling of the industry and believe that the sooner we start developing new areas of aluminum consumption and revising the technical standards, the sooner we will get new workshops and new types of production in order to avoid shortages,” Zharov concludes.
The Big Four
The four main players in the Russian aluminum products market are Alcoa (acquired Belaya Kalitva Metallurgical Works and Samara Metallurgical Works (SMZ), respectively renamed as Alcoa SMZ and Alcoa Metallurg Rus); Stupino Metallurgical Works (part of RT-Metallurgy); Kamensk-Uralsky Metallurgical Works (KUMZ, part of Aluminum Products); and En+ Downstream (formed in 2009 on the basis of two semi product manufacturing assets that were not included in UC Rusal). Collectively, these four companies supply both the domestic and international aviation markets.
According to Vladimir Skornyakov, president of Aluminum Products, KUMZ today provides approximately 60% of aviation and defense sector needs for aluminum roll. KUMZ’s main foreign customers are Airbus, Boeing, and Bombardier. Still based mainly on Soviet resources, KUMZ plans to pursue modernization of 66 year-old mills which will require approximately 22 billion rubles of investment. The Russian government appointed the Russian Ministry of Industry and Trade to consider state support for the KUMZ rolling mill and it is still unclear whether potential state lenders will give it a green light. In January 2011, KUMZ announced a tender for development and construction of a cold rolling workshop and invited duly qualified Russian and international companies to bid. “Per ton production of aluminum in Russia, costs $700 more than in Germany,” notes Andrey Kurganskiy, commercial director of KUMZ.
KUMZ’s strategy is focused on enhancing its specialization in hi-tech industries, mainly the Russian and foreign aviation sectors. In the frame of gradually developing long-term partnerships, KUMZ is undertaking certification and qualification; improving its technological basis; and implementing large investment projects aimed at modernizing equipment and organizing production.
Despite the added value of aviation products, the trend amongst aviation companies to increase production volume continues. While KUMZ produced slightly more than 1% of total aviation product volume in 2005-2006, the share of aviation products for the Russian market was only 6.7% in 2010 and 9.4% in March 2011.
With regards to building common prospects with international aviation companies such as Boeing, Airbus, and Bombardier, KUMZ opened a specialized department for quality control to aviation semi products and certify their compliance with standard requirements. According to Kurganskiy, “One of the key factors in the aerospace industry is quality and reliability, namely Just-In-Time (JIT) deliveries and good and predictable quality. Comparing the global aerospace industry and the Russian aerospace system, the latter has a different approach in terms of quality control; but this is changing”.
Alcoa SMZ and Alcoa Metallurg Rus, Alcoa’s Russian assets, supply products for Boeing that use Russian spare parts for civil jet construction. “In 2005 – 2009, Alcoa carried out massive modernizations at its facilities to focus on aviation product development. products. Based on the Federal Program for aviation development, we have invested approximately $330 million in plate development and sheets production for the aerospace sector. Unfortunately, it will take long before these investments pay off, but we are ready for market growth and increased demand from aircraft manufacturers’, note Alcoa-Rus spokespeople.
Stupino Metallurgical Company (SMK), part of RT-Metallurgy Holding, is the third largest manufacturer of aluminum products in Russia, according to Anatoly Zharov, the company’s general director. Aviation companies are SMK’s main, but not sole, consumers. In accordance with SMK’s corporate reorganization, its current priority in aluminum is production of sheets, slabs and tape. According to Zharov, due to the rise of Russian industries such as aircraft construction, annual growth of aluminum production in Russia is approaching 800,000 tons. The expectations are to double production volume by 2015 to reach 1.6 million tons per year. It is notable that SMK is preparing to take part in the Russian aviation construction program through 2025.
Natalia Vasilenko, director of En+ Downstream: now is the right time to create demand
En+ Downstream’s shares in the Russian extrusion market have reached 10% with plans to increase to 30% for extrusion and construction profiles. Ultimately, En+ Downstream is committed to tripling its output in aluminum products. Natalia Vasilenko, director of En+ Dowstream, is confident that the market will be enough for the Big Four.
Last year, En+ announced plans to create the largest rolling facility in Russia on the basis of Krasnoyarsk Metallurgical Works (KraMZ) plans to manufacture aluminum products for aviation and shipbuilding. How is the project advancing, what are the main challenges, and what are the required amounts of investment?
KraMZ was constructed as a large metallurgical facility for the local aviation and defense manufacturers. The purpose was to transfer the main parts of aviation production from Central Russia closer to natural resources and low-cost hydro energy in Siberia. KraMZ was designed as one of the largest facilities in Russia, with capacities for foundry and extrusion production and equipped with powerful press equipment and bars for the defense industry. The work envisages manufacturing mill products in a 145,000 square meter special workshop with ready infrastructure, and an assembly plan for new rolling equipment capable of producing 1 million tons of products per year. To achieve this, KraMZ plans to deliver an 8-stand rolling mill that produces slabs over 30 meters long and 2.8 meters wide for Russian aircraft manufacturers. However, financing for KraMZ was cut off following a change of management at the Ministry of Aviation. When En+ Downstream eventually became a 100% shareholder of KraMZ in 2009 we focused on resuming creation of a new flat roll facility. The initial volume of investments was estimated at $350 million and was increased to $350 million after we decided to install additional equipment to form a flexible product range that would correspond to market demand.
Interestingly, the banks are very positive about this project which is extremely encouraging for us. On one hand, they witness growing demand for the corresponding products. On the other hand, our project has very strong competitive advantages against similar projects in Russia: low capital expenditures (greenfield construction of a similar rolling facility would cost at least $1.5 billion), low production costs, and geographic proximity to our main consumers. By our estimates, the payback period of the project will be around eight years. We are expecting to arrange financing by mid-2011. In 2 years, KraMZ will produce slabs, and in five years it will produce the entire product range.
Does that mean that the objective of En+ Downstream is to re-focus KraMZ on aviation industry?
We see KraMZ as the Russian leader in production of virtually all types of aluminum semi-products for aviation, shipbuilding, construction, transport and packaging. For instance, today our share on the Russian extrusion market has reached 10% and we aim to increase it to 30% for extrusion and construction profiles. If the market of construction profile develops, we will become a competitor for large international brands that are present on the Russian market. Production of long profiles is a niche that is quite hard for other manufacturers, and we are ready to assume that task.
As far as shipbuilding and transport machine building is concerned, En+ Downstream and Siemens participate in an aluminum car production program for railways on the basis of KraMZ (also, possibly, KUMZ). Our competitiveness depends on the number of opportunities that we have and the key point for us is to assert our capabilities.
Do you think there is a discrepancy between available production capacities and the needs of the Russian aerospace industry?
We have closely studied aviation development strategies and the letter where Alexey Fedorov, ex-president of UAC, forecasted a deficit of 5.5 million tons of aluminum roll by 2015. According to the production volumes announced by the Russian aircraft manufacturers in civil and military aviation, there is a possibility that the industry will face shortages of aluminum semi products which is the reason behind our key investment project for the creation of the largest rolling facility at KraMZ. However, I would like to draw attention to the fact that unless we modernize the available facilities and construct new ones, we will very soon be unable to produce competitive products for the Russian aircraft manufacturers who want to compete with the likes of Airbus and Boeing; they need high quality products at lower prices. If the market grows, it will be enough for En+ Downstream, KUMZ, Alcoa, and SMK. The wider we make our offer, the more competitive we make our product because Russia is interested in selling aircraft and equipment and not just raw materials.
Stimulating consumption of aluminum products: aluminum market needs new ideas
In early 2010, Igor Sechin, deputy prime minister of Russia, issued directives to support post-crisis development of metallurgy with and to stimulate aluminum demand.
According to a forecast by UC Rusal, aluminum sales in Russia and the CIS in 2011 will grow 22% to 979,000 tons as a result of market recovery and the development of the machine building, construction, and packing industries. Aluminum exports are expected to fall by 100,000-150,000 tons. UC Rusal also forecasts 8% cumulative yearly growth of aluminum demand in Russia from 2011-2015.
In January 2011, UC Rusal, manufacturers and suppliers of aluminum, roll, and profiles, and the Russian Union of Metal and Steel Suppliers (RUMSS) approved a program to stimulate consumption of aluminum products with more than 30 leading manufacturers of products containing aluminum. At an April 2011 round table organized by RUMSS focused on stimulating consumption of the “flying metal,” the market players agreed that, despite post-crisis recovery the aluminum market will see greater benefits through expanded use of aluminum in railways and construction; greater application in the automotive and machine building industries; increased lobbying for a new law which supports the manufacturers of innovative materials; and initiation of protective measures to limit aluminum product imports. According to the participants, the Russian military industry is a very important aluminum consumer and represents a potentially big niche for aluminum semi products.
“Aluminum can compete with other raw materials in many Russian industries,” noted Sergey Belskiy, UC Rusal sales director in Russia and CIS, at the meeting between RUMSS, Rusal, and other aluminum suppliers, “However, it still lacks wide application. Russian companies can develop new types of products with aluminum and produce quality that is equal to foreign products. This is why UC Rusal is offering a program for promotion of aluminum-based technologies that will be implemented on various levels – from cooperation with R&D institutes to working on legislative measures aimed at supporting Russian manufacturers.”
Special steels and alloys in Russia: improving quality and adding value
The largest Russian manufacturers of special steels and alloys and special steel products for civil and strategic industries are Krasniy Oktyabr in Volgograd, Stupino Metallurgical Company, Electrostal Steel Works, Mechel, Ruspolymet, UMMC, and VILS. The main technological characteristics of this industry are complex metal processing and facilities that have unique equipment and active cooperation within the industry. Due to a sharp fall of domestic demand over the last 10-15 years, special metallurgy had no alternative markets. As a result, companies in this sector had 5-7% profitability which generating minimal margins for modernization and production overhaul and leaving average equipment wear above 60%.
Taking into account the importance of providing special steels and alloys to strategic industries, Igor Sechin ordered subsidies in 2011 for metallurgical companies that manufacture for machine building and defense industries. His aim was to compensate their payments for loans taken from 2008-2010 for technical overhaul and to include metal products from special steels and alloys in the register of high value added products. Due to a sharp decrease in consumption and a high import share of special steel products in Russia in 2010, the government also considered additional measures aimed at protecting the domestic market, including prolonged antidumping duties for corrosion-resistant flat roll from the EU. Despite all the measures Russian manufacturers are not yet able to offer the entire product range with the same quality.
In this respect, modernization, quality improvements, and the ability to offer new products are considered top priorities by the main steel players. Expansion of the production cycle and introduction of new technologies to develop the widest possible value chain within one facility is especially important for manufacturers such as Electrostal Steel Works and Krasny Oktyabr who do not produce high added value products. Ruspolymet has unique products but no proper production of special steels and alloys.
In 2010, Mechel Group produced 78,400 tons of stainless rolled products after modernizing its facilities at Chelyabinsk Metallurgical Works (total investments amounted to $128 million) for better quality products and increased production of anticorrosion sheets and rolls that are competitive with leading European manufacturers. Implementation of technical overhaul will satisfy the needs special steel needs of the Russian defense sector and automotive, aerospace, and construction industries according to Metal Supply and Sales magazine.
Electrostal Steel Works initially manufactured a wide range of metallurgical products for different industries. Today, Electrostal produces over 2,000 types of steel and alloys – from pressed forgings to micro-rods, as well as sheets and tape. Since the 2008 crisis which saw a sharp fall in construction steel prices, Electrostal’s agenda has been focused on decreasing the volume of unprofitable products and expanding production of special steels. All this requires technical overhaul. In 2010, Electrostal entered the first stage of a modernization program which saw the installation of a high-speed press with 1,600 tonnage to replace Austrian equipment purchased in early 1970s. The end of the first stage and commissioning of the press is planned for 2011. In 2-3 years, Electrostal expects to maintain its leadership in special steels and alloys production and, prospectively, semi products.
RT-Metallurgy Holding, created as a holding company for the metallurgical and mining assets of Russian Technologies, unites the production and metallurgical assets in special steels – Krasny Oktyabr, Stupino Metallurgical Company (SMK), Giredmet Experimental Metallurgical Works, to name a few. Steels produced at Krasny Oktyabr go to the domestic market and for export in equal shares. According to Metal Supply and Sales, the potential Krasny Oktyabr clients visited the facility at the end of 2010 to discuss possible production of bimetal sheet that would require installation of special equipment and the use of new technologies. In this regard, one of RT-Metallurgy’s main challenges as a holding company is to generate engineering potential for the search of innovative technologies in special metallurgy. To pursue this vector, RT-Metallurgy entered a non-commercial consortium in December 2010 uniting its engineering assets with its core metallurgical institutes. Working jointly with VIAM, the Consortium has developed an approach to creating a technological platform with three suggested coordinators under the support of the Ministry of Economic Development and Ministry of Industry and Trade: VIAM, the Moscow Institute of Steel and Alloys and RT-Metallurgy. According to Evgeny Romanov, general director of RT-Metallurgy, “the current condition of engineering in Russia leaves no place for serious competition. We should unite and work on our tasks and not fight for a piece of the pie. Before entering free market segments we should first develop new technologies and form our offer.”
The current position of Stupino Metallurgical Company, part of RT-Metallurgy Holding, in the segment of special steels is quite confident: since the 1940s SMK has had a significant share as a supplier of complex products for the Russian aviation and other hi-tech industries. According to Anatoly Zharov, general director of SMK, “heat-resistant alloys produced at SMK are mainly targeted at the domestic market. High on the agenda of SMK’s heat resistant and steel segments today is a new type of powder metallurgy based on isostatic pressing of metal granules. Our share in it is quickly growing and the prospective market condition should drastically change in our favor. As for other heat resistant products, despite the increasing number of player we feel quite confident that we can continue to develop this segment.”
Closed production chain and new products
One of the strategic priorities for Ruspolymet, the only Russian manufacturer of ring blanks from all types of steel and alloys for aviation, engine building and energy sector, is to close its production chain and become independent from steel suppliers.
As Yuri Lukanin, general director of Ruspolymet, explains, ‘historically, each of the Russian machine builders had its own production of ingots, forgings, blanks, and instruments. Now this part of the chain has collapsed with most manufacturers and the specialized plants are in precarious conditions. As a result, many metallurgical works need these products. The aviation market is full and no longer conducive for breakthroughs there. We are now building new production to expand our business. The new workshop at Ruspolymet will have all the best metallurgy known today, with a new forging machine by Danieli (Italy) that will be launched in Q4 2011. This guarantees that we will be able to access the market very quickly with high quality products. Ruspolymet’s strategic goal is to maintain the market of ring blanks for aviation and expand the sales markets for general machine building and energy machine building. Ruspolymet is implementing its own special steels and alloys production in order to reduce the production chain. This is extremely important for our customers who are interested in quality, time, and price.”
New metals and alloys – designing tomorrow’s production with new materials
VILS (the Russian Institute of Light Alloys), a strategic company for new technologies and production of metal products from special alloys, refers to itself as “hi-tech in metallurgy” working for aviation, engine building, power generation, and nuclear energy. VILS has the best of both worlds by producing both high quality metal and competitive added value products. Its core innovations in metal super alloys production occupy a special segment in metallurgy in Russia.
Steel and new alloy producers think along the same lines as the most forward thinking aluminum companies: if you need demand, then either create it or find it. New equipment, new products, new facilities, new markets, and new customers are not even a question of tomorrow – the manufacturers and researchers need to predict the demand that will come in 20 years and design new production. Perhaps this will be a new basis for aviation – an industry that over the last few years of slow revival has turned into a target market for developers of that has turned, in the last few years of slow revival, in a target market for composite developer and engineering solutions providers that combine software and equipment.
Evgeny Shilnikov, general director of Electrostal Steel Works: is the world market waiting for us?
After a dramatic slump in steel prices and higher production costs caused by the crisis of 2008, one of the top priorities for Electrostal Steel Works was to reduce the volume of unprofitable production, expand production of special steels, and develop facilities for new products in order to prepare for tough competition among metallurgists. In 2009, Electrostal Steel Works began development of its modernization program.
What is the present stage of Electrostal Steel Works’ modernization program?
We have agreed on all the technical solutions, selected the equipment, arranged contracts for its production and assembly, and received lines of credit. In 2010, we started the first stage – installation of a 1,600 tonnage press. The end of the first stage and commissioning of the press are expected before the end of 2011.
Is the modernization program also aimed at production of high value added products?
By all means, we expect to produce higher added value in metals. Our starting point is the fact that state programs in support of industry and production overhaul will provide growth in special products. We do not intend to squeeze anyone from this market, and even if we start competing, it will be a win-win situation for all players. Healthy competition is necessary to maintain quality and we will continue supplying our traditional customers even after Electrostal installs equipment for added value production. There is enough work for everyone.
Electrostal Steel Works is taking steps to increase its competitiveness on a world level. Does Electrostal regard prospective entry on the world market, particularly in Asia, 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 these industries with our highest quality metals which exceed the characteristics of European and Asian analogs. All our production in Russia for aviation and defense should be made from Russian metal. 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.
Black Wing – the Nr. 1 civil aviation project for composites in Russia
According to Anatoly Gaidansky, president of Aerocomposit, one of the newest companies involved in the Russian aviation industry, composite production has been applied in Russia for over 30 years for the traditional elements of aircraft construction - rudders, interceptors, airbrakes, cowling, doors, hatches. The latest trend is an increase of the share of composites in aircraft load-bearing units which is a drastic upgrade in technology levels. New technologies were not developed in Russia over the past few years and, consequently, new generation materials were not produced. Several few years ago, a strategic decision was taken to implement composites in the wing and tail fin for the MS-21 mid-range aircraft. Consequently, UAC and Sukhoi created Aerocomposit as a center for composite competence in construction, technology and production for all future programs in Russian aviation such as MS-21, SSJ-100, and SSJ-130, the new generation of Sukhoi civil aircraft.
Currently, Aerocomposit and Sukhoi are developing the “black” wing prototype for MS-21 in cooperation with their foreign colleagues. In 2011, Aerocomposit started construction of two mass production facilities using the available floor space at Aviastar-SP in Ulyanovsk and KAPO in Kazan that will be specialized, respectively, in production of the main power elements, final assembly of the wing, and control elements. The new “black” wing is expected to be completed by 2013. According to Gaidansky, “the first step towards proving our competence in this area is to develop our technology under the Russian aviation programs in cooperation with the world’s leading composite manufacturers.”
Placement of Aerokomposit facilities in Ulyanovsk’s special economic zone will create a basis for further cooperation among the composite manufacturers. The special economic zone based at the international airport Ulyanovsk Vostochny is going to be the most convenient platform for development of a new concept of Composite Valley, believes Denis Baryshnikov, head of special economic zone “Ulyanovsk Vostochny”.
According to a local branch of Kommersant business daily, Sergey Vasin, deputy general director of Ulyanovsk Region Development Corporation, explains that the choice of Ulyanovsk as the basic site for production and final assembly of the Black Wing is also related to the fact that the region is ready to provide tax breaks for investors as a new special economic zone that aims to become the new aviation capital of Russia.
Composite Valley: the new greenhouse for composite competences in the heart of Russian aviation cluster
by Denis Baryshnikov, head of Special Economic Zone “Ulyanovsk Vostochny”
Composites are materials of the future: their proportion in the aircraft body is steadily increasing year to year.
Aerospace, one of the most hi-tech industries, is the birthplace of composite solutions that are successfully transferred to other industries thanks to their compliance with highest requirements to weight and durability. Such cross-industry application of composites casts a multiplier effect across different economic sectors.
At the same time, aerospace and aviation products in the product portfolio of composite manufacturers account for less than 10% and do not generate large revenues, forcing the manufacturers to transfer their technologies to other industries.
One of the reasons to create the Composite Valley in Ulyanovsk is the presence of Aerokomposit, a United Aircraft Corporation (UAC) company in charge of setting up composite production for cutting edge composite products used in composite wing – commonly known in the Russian aviation industry as ‘black wing’ – production that is being developed by UAC for its new aircraft. Aerokomposit will concentrate the widest range of competences and equipment essential for production of composites.
In general, composite business is the business of SMEs, and its main issue is the high entry barrier conditioned by large investments in expensive equipment.
For Aerokomposit and other companies involved in composite production and working for other markets, the special economic zone “Ulyanovsk Vostochny” will be a unified access center. In fact, Aerokomposit will work as an anchor to localize composite production within the special economic zone.
A lot of foreign composite manufacturers see Russia as a high potential market where they are ready to allocate their facilities. This gives the Composite Valley serious chances for success.
New generation materials for space equipment
According to Alexander Trofimov, general director of NPO Stekloplastic, a significant positive shift has emerged in the development of the aerospace industry in recent years. Apart from producing lighter wings, the Russian aerospace sector is embarking on development of a new generation of equipment for piloted spacecraft. Space equipment developers are turning to traditional manufacturers of composites for the defense and aviation in Russia. One of them is NPO Stekloplastic whose main task is currently to develop a new generation of thermal insulation materials with high temperature resistance. NPO Stekloplastic is a unique scientific and production center for the creation of multifunctional reinforced plastics and composites on the basis of a single chain connecting research, development, and production. Traditionally focused on development of new reinforced plastics since 1990s, NPO Stekloplastic has been expanding production of special fibers and materials for aerospace and other special industries. According to Trofimov, today NPO Stekloplastic has attained a very high and internationally competitive quality of reinforced plastics.
Alexander Trofimov, NPO Stekloplastic: our experience for your success
NPO Stekloplastic, the leading Russian manufacturer and supplier of reinforced plastics and composites, is a dynamic company working for the Russian aerospace, defense and nuclear energy industries.
What is the role of NPO Stekloplastic in the development of composite materials for the aerospace industry today?
Our traditional activity is the development of new reinforced plastics. Since the 1990s, we have focused on expanding production of special types of fibers and materials for aerospace and aviation.
Almost all thermal insulation for Russian spacecrafts has been produced using NPO Stekloplastic materials. For instance, we have developed unique thermal insulation for the Buran space shuttle. In this sense, we have no competitors in Russia and, I believe, worldwide. There has been a very positive trend of greater state support for the aerospace industry over the past several years. The main task is to develop new generation equipment for piloted spacecraft, and our experience and knowledge are in great demand. Space equipment developers have turned to us with a need to design a new generation of thermal insulation for extreme temperatures with unique characteristics. We are confident that we will make a solution for this task.
How would you characterize the prospects of developing hi-tech materials for the Russian aerospace industry?
NPO Stekloplastic has the greatest competitive advantages in products based on silica materials, such as high temperature insulation. This ensures our success in Russian aerospace and internationally as our materials supply customers in Germany and Japan. About 70% of our products go to the domestic market and approximately 30% are exported. NPO Stekloplastic products account for nearly 85% of the Japanese market for fireproof corrosion materials which we have supplied since 2000. The Japanese previously used metal blind but when silica materials emerged, it became clear that it is a much more cost efficient solution.
The German automotive industry uses our silica materials in engines for noise protection and temperature reduction. As foreign companies open their facilities in Russia there will be an increasing need for composites because it is easier to set up local production close to assembly sites.
How would you characterize the prospects of NPO Stekloplastic for the next 5-10 years?
The demand for our products is gradually growing. Over the last year supplies of certain types of our products have more than tripled. Accordingly, we launch new facilities to provide mass production. One of our main ambitions is to revive our participation in technical support that NPO Stekloplastic was doing in the Soviet times.
Carbon fiber: challenging today’s economic landscape
All new material produced in the USSR was mainly demanded by the defense industry. An important research direction that is now proving its full potential was synthetic metals implemented in graphite which gave birth to carbon materials and carbon fibers – a unique material with endurance comparable to steel. Production of carbon materials was based on fundamental research and companies that were or are presently involved in carbon materials are greatly proud of their scientific background. Many tend to draw a thick line between their activities and typical businesses. Such is the case of Unichimtek (University Chemical Technologies) – a scientific cluster that emerged in the Moscow State University in 1986 and was focused on fundamental research of synthetic metals for the defense industry. Viktor Avdeev, general director of Unichimtek, recalls that it was quite a bold move to step from fundamental science in business in 1990, when there was no more state financing. “But I think that our university education has always been helping us. When I deliver lectures for my students, I keep repeating: if you have knowledge, you are competitive.” Since 2000, Unichimtek has been back in aerospace and has founded a brand new Carbon Society.
One of Unichimtek’s other developments is fireproof materials that produce foam when exposed to fire or heat, creating a 5 cm thick layer from 0.5 mm thick paint. The newly formed layer is both heatproof and fireproof. This innovation is challenged by a similar offer from Superior Products Vostok (SPV) – the Russian branch of Superior Products, a well-established U.S. producer of anticorrosion and insulation materials. Ruslan Habibullin, general director of SPV, says that the company “is currently focused on market implementation of its products and further localization of production in Russia as a way of reducing costs and making better pricing.” The main concern voiced by SPV is to develop “rules of the game” – testing methodologies and technical standards with other companies that offer efficient technologies and are interested in convincing industrial customers of the long-term benefits of paying for quality.
Vladimir Khlebnikov, Composite Holding Company’s deputy general director: integrating competences and technology to make composites the present of Russian strategic industries
Aerospace in Russia today is seeing many new projects related to composites. Composite is one of the players that participate in state programs. In March 2011, Composite signed an agreement with VIAM – an organization whose blessing is indispensable for any company that wants to be involved in aviation production in Russia. What prospects does it open for your company?
If you want to keep going, you need a clear timeframe. It is necessary to improve technologies, reduce costs, and increase scientific research. In the frame of this agreement, VIAM will develop technologies for the production of composites for aviation. Composite will engage in industrial implementation using materials demanded by aviation facilities for end products. VIAM’s advantage is that this institute has managed to retain its scientific school and a good technical and experimental basis. In any case, we remain open for cooperation with all institutes that have developments for implementation in end products. Focus on the final result is our main criterion in choosing our partners.
Is Composite Holding's new Scientific and Engineering Center seen as a platform to join the efforts of different institutes and invite experts?
First of all, the new Scientific and Engineering Center was created to improve existing technologies and search for new technologies for the production of biological and carbon fiber. Cooperation with VIAM is the next stage that will ensure quality and synthesize adhesives and technology for prepregs production – glass fibers with epoxide coating.
In the metallurgical sector, there is a growing trend for competition between aluminum producers united by UC Rusal to promote their products and companies involved in composites…
Today, the world produces about 40,000 tons of carbon fiber and dozens of millions of tons of aluminum. Carbon fiber is lighter and more expensive than aluminum: the average price of 1 kg of carbon fiber is €18. This price is too high to apply carbon fiber in mass construction. If we are talking about the reaction of the industry, I can give the following example: the Automotive Producers Association is ready to apply up to 100-200 kg of composites for each car, provided that 1 kg of carbon fiber costs $12. About 100 million cars are produced in the world. This means that it is possible to produce up to 5-10 million tons of composites which is 100 times more than the current volume. Whoever manages to produce carbon fiber at this price will change the entire economic landscape of the world.
Challenges of building composite construction industry for the smaller players
The issue of market entry is on top of the agenda for small-scale developers of carbon fibers. According to Alexander Beloglazov, general director of Niagara, “Russia has good demand but the majority of organizations involved in R&D or certification are very reluctant to implement new developments because certification of new materials is always a problem.”
Niagara is characterized by a practical approach to composites and specializes in the production of fibrous fillers for carbon fibers and carbon-based composites produced with woven and non-woven technologies. According to Beloglazov, Niagara is the pioneer in non-woven technologies for carbon fibers. The combination of different technologies widely used in the textile industry allowed the application of high-density homogenic non-woven carbon frames which provided high operational qualities for products. Another important activity of Niagara is the production and implementation of Oxipan – a unique development on the basis of its own non-woven oxidized PAN fiber, a material with fireproof and chemically neutral characteristics that is widely used in Europe.
STC of Applied Nanotechnologies: changing microstructures for industrial breakthroughs
Powering research and production as a small-sized company based in Saint-Petersburg can be hard, especially when you need to popularize your discovery and explain the revolutionary impact of its application. Nevertheless, Andrey Ponomarev, General Director of Science and Technology Center of Applied Nanotechnologies, seems to have achieved that, as he recalls the unexpected minute of applause that he received after his report on the possibilities and benefits of using astralenes in aviation in front of a host of renowned academicians from the major Russian aviation institutes.
“Same as technology develops fundamentally from research and development to experimental production, organized production, and through to sales, Science and Technology Center of Applied Nanotechnologies has gone through different stages of industrial development over the last 18 years. The fundamental discovery made by STC of Applied Nanotechnologies is astralenes – new carbon nanoparticles synthesized in our laboratories. Studies of astralenes’ extraordinary characteristics and application have yielded surprising results”, explains Andrey Ponomarev, general director of Science and Technology Center of Applied Nanotechnologies.
In practice, astralenes provide essential solutions for aviation and machine building by increasing the operational resources of materials. The presence of at least 2.5% of astralenes composites protects an aircraft frame from dangerous damage given its lightning-proof composition. In construction, mobility control of liquid composite precursors is very important to improve the qualities of plasticizers. Astralenes dissolved in water can be the basis for a unique non-toxic medicine against HIV.
The physics of astralenes is based on affecting the organization of the internal structures of substances by reinforcing their borders on atomic levels. As Ponomarev explains, “the physics of astralenes is based on interaction of substance clusters to form a macro-object. The influence of astralenes makes a big difference tightening and strengthening the borders of mesa structures that form substances. Thanks to their unusual physical and mechanical properties, microdoses of astralenes create conditions for giant resonances in condensed environments by producing a 70,000 multiplication of power fields. As a result, a very small amount of astralenes is enough to drastically affect the characteristics of composites.”
STC of Applied Nanotechnologies is also involved in the development of a new type of nanocomposite fitting. While price competitiveness was initially a problem - $40 up against 40 rubles down for metal fittings – the think tanks of STC of Applied Nanotechnologies and Niagara devised a solution to combine the qualities of fittings, concrete, and carbon fiber. As a result, the new nanocomposite fittings are competitive in price with metals and possess better qualities. Technology of the fittings envisages the possibility of installing information devices such as RFIDs, also referred to as intellectual nanocomposite fittings. Currently under patent, RFIDs are now waiting market commercialization.
As Beloglazov and Ponomarev agree, “the market situation in Russia clearly shows that there is no conception about cooperation between the large and smaller players yet.” The major players are involved in state programs and cooperate with the Russian Academy of Science which has very few applied works. Smaller companies, meanwhile, such as Niagara and STC of Applied Nanotechnologies unite fundamental research, R&D and production. As Beloglazov and Ponomarev note, “we use the modernization principles of the economy. For this reason, cooperation is essential for us.” Apart from Composite Holding Company, ready innovations are used by the Moscow Institute of Thermal Technics, the State Optical Institute of Vavilov and KBSM in Saint-Petersburg. Smaller companies see their size as an additional advantage which gives them flexibility in choosing ways to cooperate.
Acting as a single industry is a “step forward,” according to Sergey Vasyutkin, general director of Composite-Grupp Ltd. “Developers and manufacturers of composites work with new materials, new products, and new substances – we are a 100% innovative companies. We act as inventors, logistics operators, and employers. Small composite companies remain the only source of HR, science, and technology,” comments Vasyutkin.
An important activity of Composite-Grupp Ltd. was to found and promote the Union of Composite Pipes and Products Manufacturers (Soyuz KTI). As Vasyutkin explains, “Russia has no standards yet for wide application of composites in construction because testing requires big investments. Development of new standards is a mission of the Union – to create a platform that communicates the interests of the composite industry to the government.” According to Sergey Vasyutkin, while the world composite industry growth is 15% per year, annual growth in Russia is only 5-7%. One way to bridge the gap is to develop additional standards. This strong necessity forces companies like NPO Stekloplastic and VIAM to unite through joint developments and combine knowledge and experience. Their current task is to unite engineers from all industries involved in composite production.
Lack of cooperation and funding are the greatest challenges hindering the growth of smaller participants of the composite industry and the adjacent nanoindustry in Russia. "We are certain that our products can find different applications that we didn't even start to imagine but, as a small company, we have to choose a focus for our efforts", says Ilya Fastov, general director of Nanotechnologies and Innovations (NT&I), a Zelenograd-based independent start-up run by a 26 year old guy with a perfect match of scientific and financial expertise. According to Fastov, one of the problems of the Russian nanoindustry is that there are no clear criteria of what is “nano” and what is not. “A few years ago, it was agreed that “nano” is everything less than 100 nm, so it is not clear whether our products match nanosizes”, comments Fastov.
NT&I, based in Zelenograd, has synthesized something similar to Ponomarev’s astralenes - a so-called nanotube (average length 1,000–3,000 nm, average width 50 - 100 nm) that, when added to a certain material, changes its mechanical characteristics. What’s more, the nanotubes are hollow. Active ingredients (anticorrosion materials, antibacterial materials, growth activators for agriculture, cosmetic substances) slow down their exit from the tube. Technologies of controlling this speed are also developed by NT&I.
Talking about the difficulties of finding state support for start-ups and emerging companies in Russia, Fastov comments that “The European authorities involved in innovation use a notion of ‘lost money’ – money that is allocated for start-ups and subject to high risks of return. While European governments realize that only the state can make early stage investments in innovation, Russian government requires guarantees for return of the allocated funds. Russia has great interest to use composite materials but no resources yet to turn this interest into reality. Innovation is an area that is particularly challenging to forecast.”
Meeting the needs of metallurgy and composites: advanced software and IT solutions for new technologies
For the first time in 20 years, Russia needs to create technologically advanced machines with added value such as aircrafts, engines, nuclear reactors, trucks and agricultural equipment, and oil and gas infrastructure. The main concern for these projects is not financing – in most cases, they count on state support – but the lack of schools for modern technologies. The latest technological developments in metal processing and composite construction result in huge demands for the corresponding equipment and software as well as for massive and costly overhaul.
To meet this demand, software vendors offer full IT solutions related to product lifecycle management (PLM). Previously, PLM stood for product life cycle from launch of production, regulation of production volume, defining time for production of new or renewed products to maintenance and service. However, drastic changes in the concept of PLM have emerged in recent years and today PLM stands for automation of the entire work cycle — from design to distribution.
PLM came to Russia in the early 1990s when the restriction of American PLM technologies to Russia was lift. According to Viktor Bespalov, general director of Siemens PLM Software Russia, “implementation of PLM technologies gets to the basic processes for any industrial company – R&D and production. Obviously, changing these processes takes time. Moreover, we are talking about changing the mentality of the people who start using these technologies. When we approach Russian companies today, we offer both software and implementation methods according to specific algorithms and corresponding standards that a company can use after the system is launched.”
Aerospace is one of the key industries in Russia that requires implementation of PLM solutions because it is nearly impossible to develop aircrafts today without digital product development software. The main products offered by Siemens PLM Software for digital product development – NX and Teamcenter – allow the creation of digital mockups that are key to a transition to paperless operations. Sukhoi, ranked first among the Russian aircraft exporters and third worldwide in terms of the production of modern fighters, has studied and tested various systems including CADDS 5, I-deas® software, Catia, and Pro/Engineer as well as the NX® digital product development system from Siemens PLM Software. “The global aviation industry uses NX and Catia,” says Evgeny Savchenko, head of MCAD at Sukhoi Design Bureau. “It was up to our engineers to select the system they wanted and they chose NX, which was originally developed at McDonnell Douglas.” When Sukhoi Design Bureau initiated pilot projects involving digital mockups of airplanes aimed at developing an airplane with light aircraft engines, data management was handled by the Teamcenter® engineering product and process management system from Siemens PLM Software. “Thanks to a seamless implementation of the newest MCAD and PDM technologies from Siemens PLM Software, Sukhoi remains one of the leading corporations in the aviation industry,” comments Savchenko.
According to Bespalov, “implementation of PLM technologies gets to the basic processes for any industrial company – R&D and production. Obviously changing these processes takes time, and here we are talking about changing mentality and ways of thinking of the people who start using these technologies. Unlike ERP, where implementation of functional modules does not take more than 8–12 months, PLM technologies envisage reconstruction of both business processes and thinking.”
In composite manufacturing, a very specific area for Siemens PLM Software that concerns both fundamental science and development of composite fibers, Siemens PLM Software competence is mainly in integrating products, such as NX by Siemens and FiberSIM by VISTAGY. The new agreement on strategic cooperation between Siemens PLM Software and VISTAGY opens big markets for both companies. Today, products of Siemens PLM Software and VISTAGY interest aviation and engine manufacturers as a well as aerospace and shipbuilding companies. Moreover, composite technologies are related to stealth technologies for aviation and defense companies. Although composites have been known in aerospace for a long time, today composites are applied for the first time in power elements, hence the technological and managerial challenges. According to Bespalov, the black wing – presently the main composite project in Russian aviation – is an equal challenge for UAC in Russia, for Comac in China, for Bombardier in Canada, and for Airbus in Europe. That is why development of corresponding knowledge and experience is so important: “If you learn to do quicker and better, you win.”
Other projects executed by Siemens PLM Software for the Russian aerospace industry today include a unique project with Khrunichev State Research and Production Space Center run at four different sites simultaneously involving experts from Siemens PLM Software and Khrunichev Center. The project is aimed at increasing production of new and modified products, reducing product development periods and lowering technological setup costs. “We plan an extensive program for modernization and higher production volume,” notes Vladimir Nesterov, general director of Khrunichev State Research and Production Space Center. One of its priorities is to implement an automated product lifecycle management system across the member companies of Khrunichev Space Center. This PLM project is going to be the largest and shortest ever in Russia and partnership with Siemens PLM Software makes us confident that it will be successful,” he states. According to Steffen Buchwald, vice president and managing director of Siemens PLM Software for Central and Eastern Europe, “the fact that our products have been chosen by Khrunichev State Research and Production Space Center enhances the leadership of Siemens PLM Software as a supplier of PLM solutions for defense and aerospace.”
The current outlook for composite aircraft and airframe manufacturing for VISTAGY, a leading global provider of industry-specific engineering software and services, comprises all the new aircraft programs such as Boeing 787, Airbus A-350, Bombardier CSeries, LearJet 85 business jet, MS-21 and Comac 919. “We have barely scratched the surface of the potential of composites in a number of industries. I believe that VISTAGY’s solutions will continue to resonate with global manufacturers and suppliers. We are particularly pleased to be working with more and more customers in the Russian market and we view this as one of the most dynamic and critical aerospace markets. We believe that it will only continue to grow in influence in the world of aviation. VISTAGY is excited about the opportunity to help Russian companies expand their composites expertise so that they can maximize their potential for success,” comments Steve Luby, CEO and founder of VISTAGY.
Apart from offering comprehensive IT solutions, software vendors look for partnerships with companies involved in engineering consulting that deal with technical equipment and production organization in order to involve a maximum number of end users with comprehensive solutions. According to Vladimir Zhurakhovsky, general director of Delcam Ural, “The client does not need software. The client needs a full solution that includes software, technology, training and equipment.”
Initially a supplier of specialized software for CNC machine tools by Delcam (UK), Delcam Ural has grown into a company offering full CAD/CAM/CAE/PDM/PLM solutions. As Zhurakhovsky explains, the main prerequisite for this “transformation” was the Russian way of organizing production. Standard production chains in Russia join design and production. When Delcam Ural realized that it was not reasonable to supply narrow solutions for large manufacturers, it customized its product range according to the tasks faced by large manufacturers – typical clients of Delcam Ural. Currently half of its turnover comes from engineering software which is “booming” in Russia at the moment, according to Zhurakhovsky.
Zhurakhovsky draws a firm line between general engineering consulting and new, breakthrough technologies that are considered to be the most sophisticated, such as composite engineering. Delcam Ural’s solutions are based on ESI Group software (France) widely applied by the European aerospace companies. To bring and adapt the Western experience in Russia, Delcam Ural and Delcam have implemented a few consulting projects such as the project for development of monowheel production technology for the new generation of engines.
Vladimir Zhurakhovsky, general director of Delcam Ural: the client needs a full solution that includes software, technology, training and equipment
Initially a supplier of specialized software for CNC machine tools by Delcam (UK), Delcam Ural has grown into a company offering full CAD/CAM/CAE/PDM/PLM solutions for large industrial manufacturers – typical clients of Delcam Ural.
Mr. Zhurakhovsky, what industries represent the largest demand for Delcam Ural’s software and technology?
While our traditional clients in Russia are Ural-based machine building companies, over the last few years our client portfolio has been upgrading to a national level to include the largest of Russian corporations such as Oboronprom Holding, Rosatom, Roscosmos and UAC. Some of our customers today are also the largest Oboronprom companies: Perm Motors, NPO Saturn, Klimov, MIL Moscow Helicopter Plant, Kazan Helicopter Plant and Ufa Engine Production Company (UMPO).
European aerospace giants such as Airbus use ESI systems to model aviation engine production on the basis of composites. In your view, what are the prospects of implementing these solutions in Russia?
The prospects are quite good because the principles of building aircrafts are the same in Russia as in the rest of the world. Moreover, modeling technologies for aviation engines are essential for creating competitive products and ensuring efficient production because they reduce deficiencies, improve reliability, and enhance quality. Apart from software, we offer technologies and consulting because the production of composites requires specific equipment and knowledge. We advise companies on how to organize production and the types of equipment and materials to use. This practice has been developed abroad and we are ready to help Russian companies implement it.
What is the role of Delcam Ural in the value chain that connects global software vendor with manufacturers?
We supply comprehensive solutions and can choose the best solution that is tailored for every company in terms of its price and capabilities. Large vendors sell their software and are therefore not necessarily independent. We are also not fully independent but we have more flexibility when it comes to choosing solutions.
Another competitive advantage of Delcam Ural is its partnership with Delcam, not just a software producer, but the British expert in cutting-edge technologies. Due to our significant sales growth, an increase in our client portfolio, and more engineers that we have working with us, we have decided to separate the departments of Delcam Ural specialized in software design and technology, comprehensive PLM solutions, and engineering into a new company – PLM Ural.
Local strategies for international equipment manufacturers: building partnerships and localizing training, servicing and production
Equipment manufacturers who engage in projects with Russian metal, automotive, and aircraft construction companies are also interested in partnerships with engineering, consulting, and software companies. One of VISTAGY’s long-standing partners in the Russian market is with MAG, a world leader in terms of technological potential and range of equipment. MAG’s equipment and technologies cover titanium and aluminum alloys processing, composite fiber placement, and a wide range of solutions from jobshops for smaller enterprises to industrial solutions for Boeing, Kamaz, VSMPO-AVISMA. Sergey Gerasimov, President of MAG Russia, highlights MAG’s aerospace projects with VSMPO-AVISMA and Boeing, Voronezh Aviation Plant (VASO), UAC, Aviastar-SP and Salyut, automotive projects with GAZ, KAMAZ and AVTOVAZ, and projects in heavy machinebuilding with NTMK, KONAR, Metrovagonmash. Some facts speak for themselves: as early as 1893, Russian Railways bought 115 machine tools by MAG for the royal railways.
120 years later, Russian industry is going through major changes. Equipment requires modernization and even replacement. Certain types of its machine tools such as composite fiber replacement machines are quite unique and not yet produced in Russia. Moreover, the Russian aerospace needs this kind of equipment and engineering to increase aircraft production volume. In aerospace, MAG cooperates with Obninsk Research and Production Enterprise Technologiya, a manufacturer of composite rockets, and is developing a new production concept of to extend current applications from aviation and rocket construction to the automotive industry where MAG is involved in a few projects.
A typical strategy of a machine tools manufacturer like MAG is to operate as an integrator with its partners to create turnkey solutions. In the spirit of partnership, MAG has created a direct interface for VISTAGY’s FiberSIM software and the composite fiber placement machine. MAG also works with GEMCOR, a manufacturer of riveting machines, to connect elements of aircraft body. With its partners on the Russian market, ITS and SOLVER, MAG offers comprehensive solutions with thoroughly structured technological chains. Moreover, MAG has made a strategic step of certifying its equipment in Russia.
According to Gerasimov, the main elements of MAG’s strategy in Russia, apart from integration to create turnkey solutions, are participation in joint projects and localization of production. MAG’s technology service is localized through its representatives at AVTOVAZ and VSMPO-AVISMA and through its agent network. One reason why MAG opened a technology, service, and training center in Nizhny Novgorod with TOR Engineering is its proximity to automotive customers and end users of MAG machine tools. In particular, MAG has installed the first automatic composite fiber placement machine in Russia at VASO in Voronezh.
However, the market of cooperation is not yet as strongly developed in Russia as it is in the U.S. “Offering our solutions and equipment, we are flexible in maximizing our potential to develop together. If Russia develops cooperation, we will support it,” concludes Gerasimov.
Cooperation with local organizations and companies that produce software and offer technical support is also the local strategy for Ingersoll, one of the world’s largest manufacturers of heavy duty machines and part of the Camozzi Group. While Ingersoll’s track record in Russia dates back to the 1940s when heavy machines were installed for the recovering steel and energy industry, its current priority is in new composite fiber placement technologies for aerospace. According to Renato Biaggi, senior area manager of Ingersoll, there is not yet much competition in composite fiber placement machinery in Russia. The problem is that when a new technology appears, it is very difficult for customers with no background in automatic carbon fiber placement technology to make decisions. According to Biaggi, as it is very hard for the end user to make a decision on his own, the idea is to offer technical support to customers at the best of Ingersoll’s capability and experience. “Now that it is a transition, not many people know the real capabilities of the equipment combined with good IT solutions. But end users have good weight in the decision so we must work on all directions. Over the next few years, we will be able to provide new advanced solutions which will be attractive for the end user. As we are in a period of transition; we have not yet made a final decision on our partners in Russia relevant to the aerospace industry. What we would like to have is a more open market, more open doors and not so many steps to make. We are capable of producing and we want to be part of fair competition,” Biaggi concludes.
Obviously, large foreign manufacturers of machine tools represent serious challenges for Russian equipment manufacturers. However, Russian manufacturers such as VNIIMETMASH (the Russian Design and Research Institute of Metallurgical Machinebuilding) have a long track record as suppliers of reliable and cost-efficient equipment for metallurgical production worldwide and are not ready to give up their positions on the Russian market. According to Alexander Nalivayko, first deputy general director of VNIIMETMASH, “some Russian companies that are operating foreign equipment with high prices for spare parts due to the export duties are again looking for Russian suppliers. As a result, European companies are ready to give their engineering and sell equipment under Russian brands. One of our live examples is a company that bought the same type of equipment from VNIIMETMASH and from a European supplier. After two years of operation it was evident that the Russian equipment was far more competitive. This is a graphic example of how we fight with our foreign competitors.”
Automatic production of composite spare parts at VASO: start of the composite era in Russia
JEC Show Composites 2010 opened with its general director Frederique Mutel declaring that “2010 is the beginning of a new era – the era of composites.”
The efforts of SOLVER, one of Russia’s leading engineering consulting companies, and its partners MAG and VISTAGY, give all the grounds to affirm that the era of composites in Russia has started. SOLVER, a company that has executed 540 industrial projects and installed more than 445 automatic working places and 670 machine tool units, is implementing a unique project for comprehensive automatic production of composite spare parts at Voronezh Aviation Plant (VASO). Previously Russian plants produced composites manually. What SOLVER did, however, was purchase engineering and consulting competencies in automated manual and mechanic production for composites.
Elements of aircraft body, wings, and tail fins will be produced in a new facility at VASO using MAG Viper 1200 FPS, the first automatic composite fiber placement machine that will drastically increase productivity and the quality of manufacturing components compared to earlier manual methods. Using the capabilities of FiberSIM (VISTAGY) and ACES (MAG) software, the manufacturer will saves costs in modeling and production with composite materials.
According to Radislav Birbraer, general director of SOLVER, “with the new MAG machine, we make deep implementation of new technologies for component production. But prior to implementation, you need to understand engineering processes and how to transfer this knowledge to other specialists. At the moment, we are studying automatic placement of prepregs and forming consulting services on their basis, in order to transfer best practices to aerospace companies. As a consulting company, we saw the impressive economic effect of this technology. The main aspects of optimization are lower labor and materials costs through composite placement.”
In 2010, SOLVER invested about $600,000 in Vistagy specialized software and to train staff that is now, together with specialists of VASO, doing automatic preparation of composite spare parts for aircrafts. SOLVER will also create a center for development and implementation of an innovative technology for composite spare parts production at the new facility.
SOLVER – an expert in implementing lean production in Russia – recognizes that challenges still remain. “Lean production is highly efficient production where the business processes and the capacities of every company correspond to the market requirements. The challenges derive from the fears of top manages to introduce necessary changes in production, motivation, planning, and training. However, our positive experience means that engineering consulting has prospects in building lean production in Russia,” Birbraer concludes.
This report, prepared and published by a dedicated team of www.russianavia.net after a series of interviews with the leading Russian players of special metals, composites, equipment manufacturing and IT solutions industry, has been finished in May 2011.
Editing: Frederic Boucheseiche and Manuel Mendoza
Our special thanks to www.metalinfo.ru, a unique information resource on the Russian metallurgy