СЕО DCH Steel Vitaly Bash: “We plan to invest $300 million”

DСH Steel CEO Vitaly Bash spoke about the plans of DCH Group to develop the mining & metals business

On the occasion of the launch of the English version of its website, GMK Center prepared a series of interviews with top managers and owners of Ukrainian steelmaking companies. The key objective of this project is to show the face of our steel industry to the international audience, as well as to reveal the specifics of production, development plans and strategic priorities of Ukrainian steel corporations.

We are going to commence this series of publications with the interview with Vitaliy Bash, CEO at DСH Steel, Dnipro Metallurgical Plant (DMZ) and Sukha Balka minery. The DCH Group announced the incorporation of DCH Steel in March 2019. In his first interview as DСH Steel CEO, Mr Bash shared with us the plans of Oleksandr Yaroslavskyi’s DCH Group to develop the mining & metals business.

In 2019, the domestic steel market is shrinking. What are your expectations for 2020? Do you expect any growth? If yes, in what areas?

— In the first four months of 2019, the volume of the Ukrainian market of rolled products remained the same as in the same period of the previous year, and amounted to around 1.5 million tons. Simultaneously, the size of the market segments that are most important to DCH Steel (channels, angles) decreased by 10% compared to 2018.

At the same time, the main reason for the market shrinking, in our opinion, is rather political, not economic. The business is traditionally cautious before the election. That’s why we believe that the size of the Ukrainian market will increase already this year, and the growth will be up to 3%.

We largely count on an increase in consumption by manufacturers of railway cars, metal constructions, mining & metals companies, private sector. Construction is a promising industry, implementation of large infrastructure projects in particular. Thus, according to our forecast, the domestic market will keep growing in 2020, and its size will increase by another 4% at least.

How much capital investment did mining & metals companies of the DCH Group spend in 2018? What were the sources of that capital investment?

— Last year, DCH invested some $24 million of equity funds in the development of production at Sukha Balka minery and DMZ.

How much of the announced $150–200 million for the mining business is DCH Steel going to spend in the current year? What projects is the Group going to invest in?

— Around $40 million. In the case of DMZ, the investment will cover the overhaul repair of equipment and reconstruction of furnaces. Sukha Balka will get new modern self-propelled machinery for iron ore mining. The Group is also going to finance works to prepare for deep production modernization activities.

All the above-mentioned works aim to create a production chain ore mining — beneficiation — sintering — pig iron smelting. From the point of view of production efficiency, we are planning to improve the technical condition of the key equipment, prolong its useful period, cut costs, increase productivity, improve the quality of products. In other words, we seek to achieve concurrent positive synergistic effects of the vertical integration of our technologically connected plants.

In general, according to our updated estimates, the amount of our investment program for the mining & metals business increased to $300 million.

How is the company going to vertically integrate Sukha Balka minery and DMZ? Will that be a sintering plant or a pelletizing plant? What’s the DCH Steel’s vision of its own niche: production of semi-finished products or investment in rolling facilities?

— Presently, the economic growth is slowing down globally. For the highly-globalized steel industry, this naturally means the need to introduce new approaches to the organization of production. Our key task is vertical integration of all technological operations and processes into a single production chain: starting from ore mining to metal smelting with the aim to optimize costs and improve economic and financial efficiency. For that purpose, we are considering, among other things, construction of a sintering plant.

DMZ planned to reconstruct blast furnaces Nos. 2 and 3 in 2018–2019. What’s the goal of the project? What’s the plan for building a continuous casting machine (CCM)? The mass media suggest 3 to 4 years.

— The key objective of the project is to prolong the period of stable work of blast furnaces at DMZ by another 7 to 10 years, reduce the burden on the environment in the region where the plant is located. Blast furnace No. 3 was overhauled in August 2018, blast furnace No. 2 — in June 2019. All the works have been performed fully and timely.

As for the CCM, the project is now at the phase of selecting a contractor and design. The expected period of its implementation is right what the media suggest.

I would like to emphasize that DCH Steel is an example of a socially responsible business. Environmental issues are a priority for our company. As a result of the completed overhauls and the introduction of CCM, production will become more environmentally friendly, which will therefore reduce the burden upon the environment in the region where the plant is located.

One of DCH Steel’s priorities is strict compliance with the occupational safety rules and standards, safety of our workers at production sites. During overhaul repairs of production equipment, we focus on making it stable and accident-free.

Construction of a beneficiation plant is crucial because of the depletion of reserves of rich iron ores at the plant. Is DCH going to build a de facto new mining & processing plant?

— It’s too early yet to talk about a beneficiation plant. The idea is now being discussed.

What are the main development areas and strategic plans of DCH Steel to strengthen its position in foreign markets? What prospects do you see? What will you focus your efforts on?

— We are going to focus our efforts on strengthening the company’s position in the strategically important markets, i.e. Ukraine, CIS countries, Eastern and South-Eastern Europe. In this context, we count on both the company’s traditional types of rolled products (channels, angles, special interchangeable profiles) and the so-called “niche” products (railcar-building and automobile profiles, rails, round bars). At the same time, of course, we are going to improve our in-house business processes and create an efficient vertically integrated business system.

Is DCH Steel planning to invest in steel or other (coal, ore mining) assets abroad, e.g. in purchase of a rolling plant in the EU?

— We are considering various scenarios of expanding our rolling capacities, including a purchase of assets in the countries of the European Union.

Labor outflows is a pain for the whole domestic mining & metals sector. What is your recipe for fixing this problem?

— Our position is that Ukrainians should work in their homeland, in Ukraine, beside their families, earn high and timely salaries, have confidence in the future. Investment, new equipment and machinery at our plants are what guarantees stable operation of all our assets, growth in production capacities and improvement of financial results. In its turn, it allows raising salaries, introduction of additional social bonuses for our employees.