President of Russia Vladimir Putin: Good afternoon, colleagues,
Yesterday, we celebrated Metal Industry Employees’ Day in Russia and I would like to congratulate all the workers in this industry on their professional holiday, to wish them success and good health.
Metal industry in our country has shown good results in recent years, and I imagine there is no need to describe its significance for the Russian economy since it has always been and is now one of the cornerstones of our economy. The metal industry includes over 1,300 enterprises, employing thousands of workers, nearly all of whom are highly-trained specialists; moreover, the state of the entire Russian economy, of cities, villages and entire manufacturing sectors depends on their performance. As a matter of fact, we will discuss today the way the steel industry is developing and the current situation on the [metals] market, the correlation between the interests of the main consumers and manufacturers of the metallurgical industry.
The growing investments in the sector have become an important sign in recent years. I am pleased to note that wherever I go, whatever [metal] company I visit, high investment activity can be seen actually everywhere which means that metallurgical company owners, key shareholders and managers take care of their labour force, social problems, the environment and the future progress of the industry.
In the last five years, more than a trillion rubles [$31,5 billion] have been invested in the sector and this is very telling. I doubt there is as great an investment boom – over a trillion rubles – in some of our neighbouring nations, where the metal industry had also been a significant component of the economy in previous years. This is a good progress, a good result. Depreciated fixed assets in Russia amounted to over 53 percent in 2002, I believe, but by 2011 the figure dropped to 40 percent – i.e., a 13 percent decrease. This is a very serious result.
Investments in the metallurgical industry are aimed at meeting the demand of consumer sectors, and the executives of some of the largest consumer companies are also present today and represent the automobile industry, railroads, the fuel and energy complex, shipbuilding, aircraft engineering and construction. These [investment] projects are implemented within the framework of Russia’s Strategy for Developing the Metallurgical Industry through 2020, as you know, and are also conducted in conjunction with the corporate strategies of Russia’s largest companies.
As I already said, we have many examples of large investment projects. In the last five years, about 190 billion rubles [$6.5 billion] have been invested in the production of strips and large diameter pipes alone, while another 76 billion rubles have been invested in improving sheet steel quality. In addition, 61 billion rubles [$2 billion] have been invested in improving the quality of railroad wheels and wheel bands and launching manufacturing of long rails, and 88 billion rubles have gone toward meeting the demand of the construction industry for flat steel.
All of these are very good results, as I said; however, we cannot stop now. The situation on the global markets, as well as here in Russia, is rather unstable and we will review it today. After the sharp decline in 2008–2009, demand for metal was restored by the end of last year, but you know for yourselves that it remains unstable, and prices for many types of products are still far from their pre-crisis levels.
During the global crisis, the state supported the metallurgical industry and steel enterprises, in part by granting government guarantees [for corporate loans]. Today, our goal and challenge is to ensure stable development of the industry. This is certainly a serious growth reserve for the entire Russian economy.
Here are a few specific points I would like to make.
First, metal producers must ensure the competitiveness of their products on the international markets, first and foremost via high quality and a wide range of available products, efficient logistics, and strict adherence to deadlines and delivery volumes – i.e., supply discipline. I would like to repeat again, international competition is extremely rigorous, as you are well aware. But the overwhelming majority of Russian metal companies are global players, hence they should not only follow the rules of the game on this market, but, as I hope, you will have a greater say in formulating those rules.
No doubt, there are barriers to overcome. As you know, more than 20 restrictive measures are in place with regard to Russian metallurgical products in various countries including the US, EU, Mexico, Turkey, Indonesia, China, Thailand and, regrettably, Ukraine. As a result, our companies lose 1.5 to 2 billion dollars every year. In order to revise the situation, the potential of the World Trade Organisation, of which Russia is almost a full-fledged member now, should be used.
Second, your products must be in demand on the domestic market. We already spoke about the fact that producers and consumers must establish long-standing partnership relations and sign contracts with clear pricing. This predictability will allow companies to build a truly long-term development strategy for production plants, investing significant funds into their technical and technological re-equipment. You already know that in 2011, the directive for government representatives at companies with state participation was approved. Today, I would like to hear about how that work is going as well.
I would also like you to tell me about what has been done in this area by all parties – by the state and businesses – and what additional measures should be taken to increase domestic demand and give metallurgists new incentives to modernise production.
There is another important issue that I would like to note. Our steel industry must make a modernisation leap. We must be more active in implementing cutting-edge technologies, including energy-saving and resource-efficient ones, and produce ultimate products. It is certainly imperative to modernise companies in line with environmental standards and requirements, and as I already said, to close down environmentally hazardous facilities. Indeed, this is exactly what is already happening, and I hope the process will continue in the future.
I recall when I visited Magnitogorsk for the first time, it was winter and all the snow was black. Today, the situation is probably not perfect, but it has nevertheless changed fundamentally. Mr Rashnikov, how many tonnes of waste was the plant producing in 2000? Do you recall?
chairman of the Board of Directors of Magnitogorsk Iron and Steel Works Victor Rashnikov: The highest levels were between 1985 and 1989 amounting to 980 thousand tonnes of gas and solid waste.
Vladimir Putin: 980 thousand tonnes were released every year into the atmosphere, and people were breathing that. The situation today is much better. How much is [released into the air] now?
Victor Rashnikov: Five times less.
Vladimir Putin: Five times less. I hope that your colleagues at Russia’s other major companies will continue their efforts to improve the environmental situation.
We saw another good example of change today at the Magnitogorsk Iron and Steel Works where we witnessed the launch of the 2,000 [Cold Rolling] Mill. It is a good example [of modernization] and the new products will be in demand. Metallurgists know what I mean. The new products we will get, premium quality extra sturdy cold-rolled steel, will be used in the automotive industry, household appliance production and construction. I am certain that it will be in demand.
There is also high potential for metals demand by the railroad companies. I hope that Mr Vladimir Yakunin will talk about it today.
I want to repeat again that currently, with strategic investors showing interest in the industry, it is imperative to assess prospects for product sales on both the domestic and foreign markets, to build long-term cooperation with consumers. I think the long-term price determination system that we spoke about many times and which I have already mentioned in my opening remarks should play a role.
In conclusion, I want to stress again that the Russian steel industry is not only showing positive momentum but also has clear development prospects. Our goal is to use them to their full potential.
Let’s exchange views on how the work is progressing, consult on some key points, issues that you believe are of greatest interest, and discuss what the state and the Cabinet could do to help you.