Stainless Steel Production Needs Deep Modernization

26 may 2017

The Analytical Center has held a round-table on the problems of production and sale of stainless steel in Russia.

"The Russian stainless steel market is characterized by a large share of imports (over 70 %), while the price for domestically produced stainless still is often significantly higher than the price of imported steel (15-45 % higher depending on the type of rolled product)," said Analytical Center expert Daniil Nametkin. "The bulk of the demand for domestically produced stainless still comes for a number of major defense contractors, nuclear power companies, aircraft manufactures and mechanical engineering companies that either have limited access to imported stainless steel or don't have it at all." The other traditional consumers of stainless still (consumer goods manufactures, construction materials suppliers, the medical sector) are showing little interest in Russian stainless steel. At the same time, around the world, consumer goods manufactures and construction materials producers are responsible for 65 % of the global demand for stainless steel of various kinds.

In order to successfully compete with imported stainless still, domestic products must first of all improve the quality of their stainless steel across all types. For example, in order to reduce the number of non-metallic inclusions and mechanical damage to the product, a deep modernization of the production processes is needed, which would only make business sense if the market for their products was at least 1 million tons per year (the current estimate is no more than 350,000 tones per year).

The round table participants agreed that production of stainless still in Russia was needed to promote import substitution in a number of processing industries. To sort out this situation three possible ways to develop the stainless steel market were suggested. First of all, the existing production facilities need deep modernization, which may cost up to RUB 12 billion, second, new production capacity should be created by companies that already have experience in exporting high margin metal products. The third way would be for nickel producers to enter the stainless steel market or directly participate in the project to modernize the key stainless still production facilities.

Participants in the discussion included representatives of executive federal bodies, industry research institutes and associations of metal producers and stainless steel consumers.