OECD Steel Committee

Steelmaking Raw Materials Workshop

5 December, 2011

Paris

Aleksey Pinchuk

Ministry of Industry and Trade of

the Russian Federation

Yuri Mishin

Metalloinvest

Steelmaking Raw Materials in Russia Availability, challenges, policy

SRM Russia

1. Mineral Resources• Iron Ore

• Coking Coal

• Coke

• Challenges

• Policy

2. Metallics• Scrap

• Pig Iron

• DRI/HBI

• Challenges

• Policy

3. Summary

2

1. Mineral Resources

3

The main iron ore and coking coal deposits

Iron ore: reserves – 99,5 billion mt.

Coking coal: reserves 447 billion mt

4

Iron ore

5

71,9 75,6 75,4 77,7 76,1 69,7 65,1 71,4 72,2

-16,8 -18,4 -19,3 -22,4 -25,3 -21,2 -21,8 -22,3 -28,6

10,1 10,4 9,7 10,6 12,210,8

8,910,6 10,5

-40

-20

0

20

40

60

80

100

2003 2004 2005 2006 2007 2008 2009 2010 2011*

Import Export Domestic supplies

Russian iron ore apparent consumption, export,import, million tonnes

Sources: Rudprom * estimate

Russia is a net exporter of iron ore. Import from Kazakhstan to Russia is determined by

logistics.

Russian share in international iron ore trade is only 2.2% (2010)

In 2011 export shipments are expected to increase by 28%

Iron ore production in 2011 is expected to reach pre-crisis level.

Iron ore

6

Europe is a traditional destination for Russian iron ore exports.

Share of exports to Europe dropped from 60 – 70% before 2008 to 28% in 2011.

Shipments to China are expected to reach 60% of total export sales in 2011.

2,25,4

3,15,7 6,1

9,6 8,8

17,4

9,1

12,710,9 16,5

15,511,6 6,8 9,4

8,1

7,7

3,6 2,9

2,84,1

3,4 5,4 4,1

3,1

0

5

10

15

20

25

30

35

2003 2004 2005 2006 2007 2008 2009 2010 2011*

Other

Europe

China

Russian exports of iron ore concentrateand iron ore pellets, million tonnes

Sources: Rudprom * estimate

Coking coal

• In 2010 export went up by 65% yoy exciding

pre-crisis levels and is expected to grow

further. Russian share in the international

sea borne trade (2010) is about 6.7%.

• Main export destinations: Ukraine, China,

Japan, South Korea

• Import is provided by technological reasons

and shortage of fat coals.

7

53,7 56,2 53,5 58,6 62,454,2 55,6 56,8

42,735,4

42,4

-7,3 -8,8 -9,5 -10,4 -12,6 -11,3 -10,3 -13,3 -13,2 -10,8-17,9

1,51,0

1,51,6 0,8 1,0

1,40,0

0,8

-20

-10

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Import Export Domestic supplies

Russian coking coal apparent consumption, export,import, million tonnes

Sources: Railway statistics, Metal Courier, IMH estimates

Coke

• Russia exports about 10% of coke

production.

• Exports of coke grew by 19% in 2010, but is

still below pre-crisis level.

8

30,7 30,5 28,725,3 26,6

-2,0 -3,3 -3,3 -2,1 -2,5

0,3 0,30,4

0,3 0,4

-5

0

5

10

15

20

25

30

35

40

2006 2007 2008 2009 2010

Import Export Domestic supplies

Russian coke apparent consumption, export,import, million tonnes

Sources: Metal Expert

Raw materials challenges

• Transport logistics for both existing mines and new projects

• Geography of new iron ore and coking coal deposits which are

located in remote areas

• Lack of industrial, energy, social and transport Infrastructure

for some of new projects

• High investments for new projects with long payback periods

• Dependence on export markets – price volatility risks

• Development of technology for iron ore treatment/processing

9

Iron ore and coking coal - policy measures

• There are no export and import restrictions for iron ore, coking coal and

coke

• Reasonable and stable natural resources tax on iron ore and coal mining

• No limitations on foreign investments into iron ore and coking coal

mining projects

• Possibility of Government support for infrastructure projects of

nationwide significance (State guarantees on bank loans, co-financing of

infrastructure projects).

• Mechanism for granting mining licenses to companies who conducted

exploration of a new deposit at their own expense

• Duty and tax free import of industrial equipment (not produced in

Russia) for new projects.

10

2. Metallics

11

SRM: Scrap

12

Scrap exports started in mid 90-s and reached its

peak in 2004-2005. Decline of exports since 2006.

Scrap reserves: for 15 years scrap collection

excided consumption of finished steel products.

Raise of domestic demand: EAF projects, extension

of steel continuous casting

18,415,0

10,613,3 13,2 13,1 10,9

13,717,5 18,6 16,8 16,9

20,5 21,926,1

29,524,1 24,0 23,1

0,30,6

1,31,7 2,7 5,3 7,3

7,6

6,8 6,45,8 7,0

12,812,7

9,97,9

5,7 3,3 4,7

0

5

10

15

20

25

30

35

40

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Export Domestic consumption

Russian steel scrap apparent consumption, export, million tonnes

Sources: UN Comtrade, Metal Courier, Worldsteel

0

5

10

15

20

25

30

35

40

45

50

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Srap collection

Apparent steel use

Russian steel scrap collectionand apparent steel use,million tonnes

Sources: Rosstat, Metal Courier, Worldsteel * estimate

SRM: Scrap

13

Russian scrap export destinations are changing significantly. In 2005 China and EU were the main

buyers. Since 2009 Turkey and Belarus have taken top positions.

China33%

EU29%

Moldova17%

Turkey5%

Belarus4%Others

12%

Russian scrap export market, 2005

Sources: Metal Expert

12,7 Mt

China1%

EU9%

Turkey38%

Belarus29%

S. Korea12%

Others11%

Russian scrap export market, 2011

Sources: Metal Expert

5,7* Mt

* 10 months date annualized

SRM: Merchant Pig Iron

14

Russia is the main supplier of the international

merchant pig iron market.

The main destinations of Russian MPI are EU,

Turkey, USA.

The share of Russian MPI in the EU market is

about 60% .

EU57%

Turkey14%

USA13%

S. Korea5%

China4%

Other7%

Russian pig iron export market, 2010

Sources: UN Comtrade

3,9 Mt

5,6 5,34,5

3,94,3

0

1

2

3

4

5

6

2007 2008 2009 2010 2011

Russian exports of pig iron, million tonnes

Sources: UN Comtrade, Metal Expert * estimate

Russia35%

Brazil21%

Ukraine13%

Other31%

World export of pig iron, 2010

Sources: UN Comtrade, Worldsteel

11,1 Mt

SRM: DRI/HBI

15

With 2.5 Mty of HBI shipments Russia is one of the

major players in the global market.

Further development of HBI production: construction

of new 1.8 miln. tpy HBI plant at Lebedinsky mine

(Metalloinvest).

EU36%

Ukraine24%

S.Korea11%

Turkey10%

Iran6%

Russia4%China

4%Other5%

Russian DRI shipments, 2008

Sources: Metalloinvest

2,2 Mt

EU34%

Ukraine15%

Russia16%

China32%

Other3%

Russian DRI shipments, 2011

Sources: Metalloinvest

2,6* Mt

* 10 months date annualized

DRI60%

Russia34%

HBI40%

World DRI/HBI shipments, 2010

14 Mt

Sources: Midrex, Metalloinvest

Metallics challenges

16

• Increase of steel EAF production is pushing worldwide

demand for iron and steel metallics.

• Raising domestic demand and limited availability are creating

conditions for scrap shortages in Russia in the near future.

• Development of new projects for HBI production in Russia.

Metallic's - policy measures and plans

17

• Export duty on steel scrap (15% or 15 Euro) will be reduced according to

WTO Accession Protocol.

• No export and import tariffs or quotas on pig iron and DRI/HBI trade.

• No import duties on DRI/HBI production equipment.

• Existing merchant pig iron and HBI capacities, new DRI/HBI production

projects will help to satisfy demand for iron and steel metallics.

SRM Russia

18

3. SUMMARY

• Russia has no trade restrictions for the main Steelmaking Raw Materials.

• Russia has no restrictions for foreign investments in SRM projects and

in Iron & Steel sectors.

• Russia will further develop its position as the leading global supplier of

primary steelmaking metallics.

• Government support for infrastructure projects (co-financing from the

RF Investment Fund, granting of state guaranties for bank loans)

• Availability of steelmaking raw materials and energy provide favorable

conditions for further development of competitive Iron and Steel

production in Russia.

19

THANK YOU!