HOW THE STEEL WAS TEMPERED

In implementing a large-scale programme of fresh industrialisation over the last four years, Azerbaijan, like most of the dynamically developing states in the world, has staked on boosting the non-oil sectors of industry. Moreover, the development of the metallurgical sector, including all the links in the chain of production from the raw materials to the finished product, has be pinpointed as one of the most important trends.  

A mega-comprehensive task

The high rate of non-oil sector growth in the post-recession period should be acknowledged as an important attainment in boosting Azerbaijan's economy. Last year while the overall growth in GDP was 6 per cent, an almost 10-per-cent growth was achieved in the non-oil sectors. This is probably the most important result in the reforms of recent years to modernise and diversify the economy and to reduce its dependence on oil and gas. At the same time, the industrial breakthrough is guaranteeing that a no less important goal is attained, namely that of doubling GDP by 2020.

It is not surprising that, having declared 2014 to be the Year of Industry in Azerbaijan at a recent Cabinet meeting, President Ilham Aliyev has particularly focussed on the need to speed up the development of the metallurgical complex. "In 2014 we must take serious steps to shape an efficient metallurgical industry, for the successful development of which the necessary material base and energy and skills potential are already available in Azerbaijan," the head of state noted. He said that the construction of a state-of-the-art metallurgical combine in the west of the country would be a very important step in bringing this about. 

The intensive development of industry and the building boom of the last decade have meant that metallurgical sector output is increasingly needed  in Azerbaijan. In order to satisfy the growing demand, a decision was adopted last spring to set up a large-capacity metallurgical complex in the country where it is expected that a concentrate will be extracted from iron ore, steel will be smelted and rolled iron produced. 

"The Azerbaijan Steel Production Complex" closed joint-stock company has been charged with tackling this task, as instructed by President Ilham Aliyev last April. All the shares in the closed joint-stock company are to belong to the state, while the completely state-run open joint-stock company Daskasan Filizsaflasdirma is also to have shares in the closed joint-stock society. The formation of the fixed capital, the initial financing, the resolving of staff issues and also the financial control of the closed joint-stock company will be administered by the Cabinet of Ministers, while the Ministry of Economic Development has been given the powers to conclude deals exceeding 25 per cent of the value of the complex's net assets.

The new state enterprise will be obliged to design, build and manage the metallurgical complex, which will embrace all stages of production, ranging from iron ore extraction to the final steel and rolled-iron output at the premises employing state-of-the art technology located in Ganca and Daskasan district. In the next year or two, when the ore-processing plants and iron and steel works are commissioned, it is planned to produce the most expensive pipes on the market. Besides this, the complex will also produce steel or ferro-concrete reinforcement structures and other types of rolled metal used in the construction industry. Approximately 100,000 skilled workers are expected to be employed at this mega-complex. 

Production goals

The need to create complete, closed-cycle production is an extremely important prerequisite for the efficient operation of Azerbaijan's metallurgical sector. Experts believe that in order to achieve this, the entire technological chain needs to be recreated, ranging from extraction of the ore at local deposits, the processing of it into high-quality iron concentrate and finally the smelting into steel. First and foremost, this approach presupposes the recommissioning of the Daskasan mining and enrichment combine (now the open joint-stock company Daskasan Filizsaflasdirma) established in 1954. During the Soviet period the republic's pig-iron requirements were satisfied by supplies from Georgia. The iron ore mined in Daskasan was dispatched to the Rustavi and Taganrog metallurgical works. In the new market conditions it is much more profitable to smelt the ore on the spot in Azerbaijan. No shortages of ore are expected since the reserves of iron ore available for extraction in Daskasan amount to 250m tonnes, which will last for several decades with an annual output of 2.5m-5m tonnes. 

The lack of a complete metal production cycle in the country has made it necessary for the new steel works to use scrap metal as a raw material, the shortage of which has already caused serious problems. In spite of the temporary suspension of exports of ferrous and non-ferrous metal waste in 2001, the increasingly fierce competition in the scrap metal trade has led to the metal producers being forced to acquire high-quality scrap metal at an ever rising price. This is largely connected with the increase in energy prices and in the scrap metal trade abroad, and over the last few years the price of a tonne of scrap metal has risen to more than 300 dollars. Naturally, the shortage of top-quality raw materials has had an impact on local metal producers, frequently causing stoppages in the steel-smelting process. 

It is quite obvious that organising a new metallurgical complex in the west of the country will substantially help to reduce the sector's dependence on scap metal.

Even today the organisation of the metallurgical complex in the Ganca region is already having a positive effect on other steel-smelting and metal-rolling projects. So, in the middle of last year the Azerboru [Azeri pipes] joint-stock company, the major pipe-producing plant in the Sumgait region, was privatised; the modernising of this plant is expected to require considerable investment. Just as promising are the plans for Azerbaijan's metal works to produce ferro-reinforcement structures, rolled steel wire, various construction fittings and pipes. Recent projects can be recalled among these, such as the conveyor belt being commissioned at the Sumgait industrial park to produce spiral steel pipes. The production of various metal constructions and metal tiles has started at the Mingacevir machine-building works. In this context, the well-known German company Siemens AG is helping to draw up the designs and supply equipment for a project to build a new 750,000 tonne-capacity steel works at Hovsan. 

Azerbaijan's existing steel works and those being set up definitely need not fear being brought to a standstill. Not only will there be a demand for their output in the construction sector, but also at the two dozen metal works already operating in the country. All the more so since at present Azerbaijan' enterprises mainly have to satisfy their demand for rolled steel and semi-manufactured parts through imports. So, ferrous metals and articles made from them account for something like 12-13 per cent of the country's total imports. Altogether, in the seven months of last year alone imports of ferrous metals and ferrous metal equipment cost as much as 764m dollars. Moreover, according to statistical data for recent years imports of ferrous metals into Azerbaijan are tenfold greater than exports of similar output. 

Thus, all the prerequisites for organising a high-capacity metallurgical complex are already there. It only remains to hope that the country's industrialisation plan will be implemented in full and the formation of the metallurgical sector in particular will help to boost exports of industrial equipment.