Metinvest has transformed its business operating model since the beginning of the war – CEO

The decisions made allowed to stabilize production volumes

With the beginning of the full-scale invasion of the Russian Federation, the Metinvest group completely transformed the operating business model, rebuilt logistics and stabilized production volumes, which made it possible to service debt obligations. The CEO of the company, Yuriy Ryzhenkov, told dsnews.ua about this through the Top 10 Wartime project, it is stated in the company’s message.

After the loss of the two largest steel plants of the group – the Mariupol Ilyich Iron and Steel Works and Azovstal – an algorithm of actions in case of emergency was developed and some management practices were introduced.

«Thanks to them, the company continues to operate, retain jobs, pay taxes, support the economy, and help the army and Ukrainians. Metinvest remains the pillar of the country,» the Group’s CEO says.

After the shutdown of enterprises in Mariupol and Avdiivka, the disruption of technological and logistics chains meant that Metinvest had to completely restructure its business. The Black Sea ports, through which products were exported, were blocked by the Russians. The company has built a new logistics – now most of the transportation to Europe is carried out by rail, as well as through the ports of Romania and Poland.

In addition, a commercial directorate was created on the basis of the sales directorate and the logistics and procurement directorate.

At the beginning of the Russian invasion, the foreign enterprises of the group depended on the raw materials of the Mariupol plants, mainly Azovstal. After reviewing the operating model, the company’s rolling mills in Italy and the UK operate autonomously using raw materials from local producers, the Bulgarian company receives semi-finished products from the Kametstal steel plant. In addition, alternative buyers have been found for the products of coal mines in the United States, which previously supplied coal to Ukrainian enterprises. These steps made it possible to significantly increase the volume of loading of foreign assets.

Metinvest Group also took care of its own generation and additional equipment in order to reduce the consequences of power outages. Thus, in February 2023, the company imported electricity from the EU, which allowed the plants to go through a difficult period for the domestic energy sector. As a backup option, the possibility of installing renewable energy sources is being studied.

Despite the constant threat of enemy shelling, the Ukrainian enterprises of the group continue to work with different levels of workload, taking into account the security factor, logistical, energy, economic and other factors.

Yuriy Ryzhenkov believes that DRI products can become a new opportunity for Ukrainian steel industry, given the development of green steel in Europe. After the liberation of Mariupol, Metinvest intends to restore steel plants by building the production of carbon-neutral steel.

«The fact that Metinvest is able to produce DRI products and can increase their volume opens up new European markets for us. We are currently looking for customers in Sweden, Germany and Austria, where we have never supplied iron ore products before,» the CEO of the company says.

As GMK Center reported earlier, Metinvest, in the first quarter of 2023, reduced steel production by 75% y/y – to 491 thousand tons. Compared to the fourth quarter of 2022, the figure increased by 96%. Pig iron production in January-March 2023 amounted to 448 thousand tons, which is 75% less than in the first quarter of 2022, but 66% more than in the fourth quarter of last year. The output of steel products (semi-finished and finished products) in January-March 2023 decreased by 58% y/y, but increased by 46% q/q – up to 829 million tons.

Metinvest, taking into account associated companies and joint ventures, in January-March 2023 transferred more than UAH 2.5 billion in taxes and fees to the budgets of all levels in Ukraine.