President of Russia Vladimir Putin: Mr Rashnikov, we have not seen each other in a long time, but I know that your group of companies keeps growing, the MMK is growing. We have agreed that you will tell me about your recent achievements and plans for the near future.
Chairman of the Board of Directors of the Magnitogorsk Iron and Steel Works (MMK) Viktor Rashnikov: We have invested over 4 billion in the past five years and 13 billion in the past 15 years, including 10 billion in the company’s development, since 1999 when you first visited the company as Prime Minister.
This was enough to install new equipment, which increased our total capacity by three million tonnes. But our main achievement is that we have improved the structure and doubled the output of cold-rolled steel since you launched the Mill 2000 cold rolling complex.
We have increased by 1,500 tonnes the production of heavy-gauge plate steel for making large-diameter pipes. We no longer buy abroad but make our own pipes.
We have also increased the output of galvanised steel from 100,000 tonnes annually in 2002 to 100,000 a month now. We produced 1.2 million tonnes of galvanised steel and also polymer-coated steel.
Vladimir Putin: For the automobile industry?
Viktor Rashnikov: Yes, for the automobile industry. We produce enough metal for our automobile plants, including 70 percent of the requirements at AvtoVAZ, 50 percent at GAZ and 50 percent at KAMAZ. We supply approximately 50,000 tonnes of steel annually to the foreign plants in Russia, such as Ford, Volkswagen and Renault. We fully meet Ford’s metal requirements.
All the projects were focused on the output for the domestic market, and I must say that we have increased it. In 2000, we manufactured 3.5 million tonnes for the domestic market. Today, we are making 9.5 million tonnes, that is, 6 million tonnes more for the domestic market.
In recent years, our sales averaged $1 billion a year, and we have broken new ground in terms of revenue with over $400 million a year on average. The total for this period amounts to $4.8 billion, which means that our tax payments are substantial. To achieve this, we built new production facilities and retrofitted the old.
With regard to our environmental activities, we reduced total emissions by 37.5 percent and the specific emissions by 47.4 percent. This required a major investment effort. Over the past five years, our environmental spending averaged $3.5 billion to $4 billion per year.
Over the past five years, we cut 3,000 jobs at the plant. As compared to 2000, we have halved our workforce from 36,000 to 18,000. We were able to do so as a result of introducing innovative equipment and technology. In terms of the group, too, we went from 60,000 employees to 45,000.
The productivity has doubled, if measured in tonnes; wages grew by 50 percent over the past five years. If you take a longer period, the wages increased by as much as 10 times: today, we are paying an average salary of 51,000 rubles. This allows us to implement social policies, such as to support pensioners, provide medical and health services to our employees, and support schools. We spend about $1.5 billion a year on charity.
Our hockey team Metallurg has won the Gagarin Cup for the second time. You sent us your congratulations, thank you. We have been champions of Russia five times now.
We have retrofitted almost everything from the steelmaking plant to rolling operations. We made everything modern and expanded the product mix.
This year we are launching a new programme for the next five years with the subsequent programmes lasting for ten-year terms: we will make the first overhaul – iron smelting from iron ore. We now start with the production of agglomerate and follow with steelmaking.
We are going to build a new sinter plant and will start its construction this year. We are finishing the reconstruction of Mill 2500 and are building a hot-dip galvanising unit that we will launch next year. Then we will make a coke-oven battery and after that start the construction of a blast furnace.
Vladimir Putin: When will you do this approximately?
Viktor Rashnikov: We will start building blast furnaces in four years. We will build a sinter plant and coke-oven battery and upgrade Mill 2500 in the next five years and will launch the hot-dip galvanising unit next year.
This will allow us to fully meet the domestic requirements for galvanised rolled products, considering that Severstal will also launch zinc plating this year and the next year. Investment will also be at the level on 700–800 million a year on the average.
Vladimir Putin: $700 million a year?
Viktor Rashnikov: Yes. In the past 15 years we invested $13 billion. There were peak years when we launched Mill 5000 and Mill 2000 but now everything is more or less balanced. This will allow us to reduce the costs and gain a profit of about $170–200 million a year on the average, as well as to reduce emissions and increase salaries.
Vladimir Putin: What is the average salary of your workers now?
Viktor Rashnikov: It was 51,000 rubles. This year we will increase it by 7 percent, so it will be 55,000 rubles on the average.
Vladimir Putin: I wish you success, in sports as well.
Viktor Rashnikov: Thank you.