This abridged report
on the Russian Aluminum Industry is provided
courtesy of Palms & Company, Inc.
by Dr. Peter Palms Phd
On the background of the general industrial
decline, Russian aluminum
industry is considered to be a successful branch of metallurgy.
This
opinion
is based mostly on the fact that primary aluminum, a basic
product of
aluminum industry, produced by Russian aluminum plants, is
in stable
demand on the world market. And this is all despite the fact
that
almost 60 % alumina processed by Russian plants is imported
and the
plants are located deep in Russia's hinterland, 4,000 to 6,000
km far
from the ports through which import comes, which make the
production
cost of aluminum quite high. The dramatic drop of the domestic
market
of aluminum products (84% in 2002 as compared with 1990) has
not much
affected the Russian aluminum plants, which switched almost
totally to
producing primary aluminum.
Moreover, competition on the world market
made Russian producers take
measures to improve the quality of metal, although this task
was not
an easy one, as 10 out of 11 currently operating aluminum
plants were
commissioned in 1930 - 1970-s with no throughout modernization
since
then.
Russian aluminum plants operated at 100
% of their total capacities in
2002 and produced 3 million tons of primary aluminum (13 %
of the
world production).
Production of rolled products, and semi-finished products,
and
construction facilities, and finished products declined by
more than
84%s as compared with the year 1990 and totaled 280,000 tons
in 2002.
The reason for was that these products were not in demand
on the domestic market.
The competitiveness of those products on the world market
is negatively
affected by limited ability of Russian manufacturers to ensure
Western
standards for the thermal and mechanic processing of aluminum
alloys, surface
quality, and geometrical dimensions precision of cold-rolled
sheets, plates, and
extruded profiles, which are used in industries and construction.
The raw materials sector of Russian aluminum
industry, despite high
demand for alumina, faces problems, too. Alumina producers
face
economic difficulties because of domestic raw materials low
quality,
rather scarce reserves of aluminous ores, high costs of mining
and
transportation. The perspective for alumina producers to overcome
difficulties largely depends on investments to modernize the
production cycle and reduce production costs. Meanwhile, the
registered reserves
of bauxites and nepheline ores give reason to expect that
for the
foreseeable future, the alumina production will stay at the
year 2002
level or will grow by 10 - 20 %. There are excellent opportunities
for
user nations to save money on imports by buying Russian aluminium
factories.
Over the last 8 years, Russian aluminum
plants produced 22.5 million
tons of primary aluminum and exported 17.2 million tons, which
accounts for 76.4 %
of the total output (in 2001 and 2002, the share of export
was even higher,
84 % and 88 % respectively). The amount of sales income from
the exports
has totaled approximately 17 billion US dollars, or, in average,
2.1
billion US dollars annually. Every year, the value of products
manufactured abroad of
Russian aluminum, totaled 8 billion US dollars. This sum is
almost
twice as large as the total annual income of the Russian aluminum
industry. Besides, some
part of Russian aluminum returned to Russia as imported aluminum
products (their volume in 2001 and 2002 totaled 100,000 and
90,000
tons respectively).
At the same time, economic self-reliance
of Russian aluminum plants
(this largely accounts for the plants located in East Siberia,
which
produce over 70 % of the total Russian aluminum output) was
ensured
mainly due to low costs of their fixed capital reproduction,
low
salaries of workers, and cheap electric energy supplied by
Siberian
hydro-electric stations, which had low operation costs as
well. World
prices for fixed capital and for the products manufactured
on its
basis are rather high, and one had reason to expect the cheap
capital of
out-of-date Russian aluminum plants to have been
reproduced in the form of modern and thus more expensive production
capacities. However, this has not happened. Low depreciation
rates,
which accounted for about 3% of fixed capital book value,
have failed
to ensure even a simplest kind of modernization. Higher depreciation
rates (about 10 - 15 % for outdated fixed assets) would result
in the growth of the cost
of primary aluminum and damage its competitiveness on the
world
market.
Presently, all Russian aluminum plants
badly need large investments to
modernize their producing units. Meanwhile rising energy costs
worldwide as high as $1400 per metric ton, have continued
to make
Russian aluminium competitive Russian aluminum industry is
strongly influenced not only by the world
aluminum market conjuncture, but also by the corporate financial
management of production and foreign economic activities related
to
import of raw materials and export of products. The expenses
of
Russian aluminum for supply/sales activities and for servicing
short-term
credits (the latter is the major source to increase working
capital)
differed in 2001 as of 1 : 16 (on the basis of 1 ton of aluminum
produced and sold), commercial expenses differed as of 1 :
4, monetary
resources on currency accounts differed by the end of the
year as of 1
: 40. Correlation of short-term liabilities and fixed capital
fluctuated from 4 - 5% at most successful plants to 150 -
170 % at
loss making enterprises that had practically depleted their
resources.
Common problems for most Russian aluminum
plants, which operate
through importing raw materials and exporting the major part
of their
products, are:
instability in raw materials supply and in produced aluminum
sales, as
the result of short-term contracts concluded between aluminum
manufacturers and intermediaries, which act as suppliers of
raw
materials and sellers of products. These trade intermediaries,
in
fact, largely shape the financial flows of aluminum plants
in a way, which
did not help the producers to operate efficiently. Russian
managers of
aluminum plants, which largely operate on the tolling scheme,
are
actually deprived of the opportunity to implement their designed
strategic plans, to perform necessary maneuvers with financial
resources that are supposed to be used in a most rational
way in the course of production activity and investment projects
implementation.
Thus, the widely spread in Russian business
circles and mass media
view of the domestic aluminum industry as prosperous is based
not on
detailed insight and analysis, but on general output indications
and
perceptions, inherited from the Soviet economy. The current
situation
in Russian aluminum industry is unique in the world practices.
It never happened in any
other country that national aluminum industry served for years
as an
intermediate link for other country's aluminum industry with
little
perspective to reproduce its own fixed assets, with its own
manufacturing capacities standing idle waiting for investments
to
modernize producer units and launch production of competitive
products. Meanwhile, Russian authorities
surely understand that technical progress in the world industries
largely depends on wide-range use of aluminum in such branches
as
automobile industry, aircraft and space industry, shipbuilding,
food
industry, construction industry, etc. Holding second position
(after
the USA) in aluminum production and using only one tenth of
the metal
smelted, Russia has fallen behind many developed countries
in terms of
technical level of many equipment and consumer goods items,
for which
aluminum is used.
Russian aluminum industry enterprises,
and aluminum plants in
particular, are at the cross-roads. On the one hand, the policy
of
survival through overexploiting the capacities has proved
to be
hopeless for aluminum industry at large and for the plants
in
particular. Still, top management of some plants may go on
with it. On the other hand, the managers with
strategic vision grow to believe that their future, as well
as the
future of all Russian aluminum industry, is in making vertically
integrated
aluminum companies, which would include raw materials divisions,
processing and manufacturing divisions. As the world practice
for over
100 years has shown, it is this kind of organization that
ensures both normal operation of
aluminum corporations and priority development of finished
products
manufacturing. It enables the aluminum companies to design
and
implement their strategic plans with the focus on increasing
value
added components and capital accumulation for further development.
Yet
so far, the real owners of the Russian aluminum plants (Russian
and
foreign businessmen who bought large packages of these plants
during
privatization) keep the beaten track of pursuing immediate
gains. They
are satisfied with their business based on over exploitation
of fixed
assets, and they are not interested in structural reforms
that might
undermine this kind of business. However, the Sayansky aluminum
plant
has seemingly made a breakthrough, as it has embarked on establishing
the first vertically integrated aluminum company. In 1997,
it founded
Sibirskiy Aluminiy group based on the Sayansky aluminum plant.
Meanwhile "compensatory invest"
and "Countertrade" offer significant
opportunitiest to Brazilian extrustion manufacturers to pay
Russian
smelters for their aluminium ingots with value added products
manufactured from the raw material
It should be noted that until the end of 1996 the Sayansky
plant was,
in fact, managed by the British trading company-mediator Trans
World
Group (TWG), which owned a large shareholding of the enterprise
and
performed expensive services in foreign management. Having
shrugged
off the TWG's grip, the plant managed, within 1997, to increase
its profit
fivefold, the added value by 150%, the working capital by
400%, and to
cut down commercial expenses by52% times, and to stop borrowing
practices. The Bird rating of Sayansky plant among the world
aluminum
producers was 54, which was the highest among Russian plants.
The drastic drop of world prices for aluminum
did not prevent the
Sayansky plant from gaining high profitability (more than
15 %). Thus,
capital funds and working capital were preserved. Moreover,
the
plants'administration set the aim to intensify the enterprise's
activities and to actively
influence the domestic aluminum market, which, naturally,
depends on
the development of Russia-located processing manufactures
that
presently experience technological problems and technological
stagnation.
Sibirskiy Aluminiy group is a vertically
integrated company, which
embraces a number of leading enterprises of the Russian aluminum
industry. It ensures a complete cycle of operation from primary
aluminum production to
sophisticated products output. The group includes: the Joint-Stock
Company Sayanskiy Aluminiyevyi Zavod (the 3d rating in Russia
in terms
of primary aluminum production capacity, a most state-of-the-art
and
envirosafe enterprise), Joint-Stock Company Samarskiy
Metallurgicheskiy Zavod (a largest enterprise in the Eastern
Europe as for the output of
rolled and semi-finished products made of aluminum and its
alloys, it
is equipped with the machinery for large-size products extrusion,
though needs modernization), Joint-Stock Company Sayanskaya
Folga (a
leading in Russia and the largest in the CIS producer of aluminum
foil, including superthin foil, and foil-based packing materials),
Rostar-Holding (the leading Russian producer of aluminum tins
for beverages), the Joint-Stock Company
Abakanvagonmash (a leading Russian producer of heavy-load
containers,
universal platforms, and special goods vans), and several
other enterprises,
including a large agricultural products company and enterprises
constituting a trade network in Russia and abroad. Presently,
Sibirskiy Aluminiy
group plans to develop into a transnational one by means of
integration with the aluminum industry enterprises of Ukraine
and Kazakhstan that
have considerable capacities to produce alumina.
In 1998, some new production capacities
were put into operation at the
group's enterprises, including production units to manufacture
aluminum tins for beverages (first ever in Russia). At the
same time, the group
launched a project that provides for utilization of aluminum
tins (a network of
tins collection points was established in Moscow). Two new
electrolysis shops at the Sayansky aluminum plant were commissioned,
and, as a
result, the plant's capacity increased by 15 % and annual
output of aluminum reached
380,000 tons (by 2002 the capacity had increased to 610,000
tons).
Simultaneously, all profit from aluminum production was channeled
to
the company's new manufacturing capacities. The work to modernize
some
production units at Samarskiy Metallurgicheskiy Zavodhas begun.
Joint-Stock Company Sayanskaya Folga's output grew as well,
too. By
early 1999, the Russian market was fully provided with foil,
and the
company's export has grown over the last years..
Sibirskiy Aluminiy group's oncoming plans
include output growth for
the goods which are in demand in Russia and in the CIS states
( called FSU
in USA). The company has a program to stimulate domestic demand.
The
program provides for granting tied loans for modernization
to food
industry enterprises to encourage them to use aluminum packaging,
particularly aluminum
tins for beverages. On the basis of cooperation with largest
aluminum
companies, particularly, Reynolds (US), a number of programs
are
scheduled to be implemented in Europe,America, and the Southeast
Asia.
In the above context, Sibirskiy Aluminiy
company has a chance to
become a Gazprom-like "natural monopolist" in the
Russian aluminum industry.
The company's top management is able to do that on condition
that it
ensures aluminum plant's efficacy growth, which would bring
the
plants'characteristics close to the standards of leading Western
aluminum
companies. Yet, the success of Sibirsky Aluminiy does not
provide
answer to the prospects of the entire Russian aluminum industry
development. The answer to this question will depend largely
on the
outcome of structural reforms in the industrial sectors as
the whole,
and this process has just started. Still, the development
of aluminum
industry enterprises that have entered the market and have
acquired a
large experience of operation in the conditions of free competition
is
likely to be the fastest as compared with all other industries.
Brazilian companies interested in
purchasing aluminium ingots and
billets can contact Palms & Company at Aluminium@PeterPalms.com.
As fontes russas de suprimentos
Por
Peter Palms, PhD 12 de Agosto de 2002 A
Rússia continua sendo um país que pode oferecer preços acessíveis
aos importadores brasileiros de matérias-primas, materiais químicos,
metais, carvão e petróleo. As empresas metalúrgicas russas
freqüentemente conseguem evitar o pagamento de suas contas de eletricidade.
Nos Estados Unidos, o custo em eletricidade para se produzir uma tonelada de alumínio
é de US$1400. Com mão-de-obra mais barata e sem despesas com aluguel
ou empréstimos, os produtores russos de alumínio têm um custo
de produção muito mais baixo. Há uma grande margem de diferença
entre a taxa de câmbio oficial e taxa de câmbio de mercado que torna
vantajoso negociar as compras em rublos. Também
é possível realizar transações comercias em que o
pagamento seja feito em forma de mercadorias brasileiras de exportação
tais como frutas enlatadas, vegetais, carnes e aves, roupas, couro, café,
açúcar e laticínios. Devido ao fato
de a burocracia ser exaustiva, é preferível determinar os preços
f.o.b. (free on board - não incluindo o preço de frete e seguro
de transporte) e deixar os compradores russos fazer os arranjos para o registro
dos produtos junto às agências reguladoras e em obediência
às regras e impostos de importação. Uma
tática importante é convidar russos para visitar você em seu
país. Visitas olho-no-olho aumentam sua credibilidade, incluindo possibilidades
de que russos abram contas bancárias nas filias de bancos americanos no
Brasil, uma oportunidade que eles vão apreciar. Com
relação a produtos de baixo valor, não hesite em enviar amostras
por meio do correio tradicional depois de confirmar o número de registro
da companhia na Rússia e obter as referências bancárias. Somente
pague pelas mercadorias depois da inspeção e mantenha a fiscalização
depois que as mercadorias tiveram ultrapassado as fronteiras da Rússia.
Evite, se possível, cartas de crédito porque entregas imediatas
não são asseguradas o que pode vir a lhe custar perdas com as taxas
das cartas de crédito. É melhor se guarnecer de diferentes formas
de garantia de pagamentos e usar transações declaradas em rublos
sempre que possível. Quem você conhece é sempre mais importante
do que quais são as regras. Na Rússia, as regras existem para serem
quebradas. Elas não funcionam como forma de coerção nem obediência.
Sempre que um tradutor ou intérprete for necessário, sempre use
o seu, trazido com você de seu país. Um conselheiro experiente irá
lhe poupar dinheiro e evitar que você caia em armadilhas, ciladas e surpresas.
Dr. Petrus Joannes van de Waal-Palms IV, PhD, President Palms &
Company, Inc., E-commerce Marketing Consultants - Founded. 1934 Search Engine
Optimization Experts - IT & ERP Advisors Palms Harbor Lights Building, Suite
103 515 Lake Street South Kirkland (Seattle), State of Washington The United States
of America, 98033 Fax: 1 425 827 5528 Email:
Palms@PeterPalms.com WWW:
http://www.PeterPalms.com
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