Ispat Karmet: Acquisition saves the mill and the town

Ispat Karmet: Acquisition saves the mill and the town

LNM Group, currently the second largest steel producer in the world, had acquired the Government of Kazakhstan's steel manufacturing facilities in the Karaganda region at the end of 1995. It was understood that LNM was originally interested in the iron ore and coal mines at the same region but ended up acquiring the steel making facilities as well, in a package deal at the end of the negotiations with the Government authorities. It has turned out to be arguably the best thing that could have happened for the employees of the mill, and the people in the region. Ispat Karmet mill is probably one of the lowest cost producers of steel in the world today, located almost next to iron ore and coal mines. However, despite being a very low cost producer of flat and coated steel products, the mill has a very big geographical disadvantage, decreasing its competitiveness in the worldwide markets due to high costs of transportation. The mill still serves its products to many markets in the world. Having said that, the main three export destinations of the mill could be listed as China, Russia and Iran. China and Russia are of course neighboring countries, and having access to Iranian market is relatively easier for the mill through Caspian Sea. Today, Ispat Karmet mill does have regular customers in many markets as mentioned above. However the situation was not the same before 1995. By then, many people in the industry did not even want to touch the products of the mill due to quality problems. Pinholes in the tinplates, conditions of the coils on arrival, limited production availabilities and other disadvantages were not allowing the mill to establish itself as a major supplier in the international market. Subsequently the mill was heading towards closure. Apart from the loss of the plant itself, the closure of the mill would have had social consequences as the town of Temirtau is almost 100% dependent on the mill. People would have had to desert the town had the mill not survived. LNM Group has reportedly invested almost one billion US Dollars in Kazakhstan since the acquisition of Ispat Karmet steel works in November 1995. The company has also advised SteelOrbis that, it has planned an investment of $580 million in new technologies and environment over a period of five years which includes investments in the new continuous slab caster and reconstruction of blast furnace number 4, in addition to others. There are three blast furnaces at Ispat Karmet mill for the time being. LNM Group had invested in the rebuilding of blast furnace number 3 after the acquisition, and the total hot metal capacity as of today is round about 4 million tons. The mill has three converters of 300 mt capacity each, and two open-hearth furnaces with a combined annual steel making capacity of around 5 million tons. The casting method at the mill is ingot casting for the time being. As mentioned above there is an investment going on for a new continuous slab casting lines started back in May 2003. The mill executives advised that there will be two lines and the first line, which will have an annual casting capacity of 2.6 million tons, would be completed by September 2004. The equipment for continuous casting line is supplied by Voest Alpine. It is understood that, in order to prepare themselves for this new continuous casting line, Ispat Karmet mill is bringing in concast slabs from Mexico, of course supplied by LNM's own Ispat Mexicana there, and running trial productions of several products in their existing lines. Moreover, the mill has already agreed with some of its customers for shipment of trial production lots. The mill management expects the investment to increase the quality of the products and productivity of the mill, whilst decreasing the cost of production significantly. Apart from the technical investments made at the mill, LNM Group's investments into the community have helped restore the lives of the people in the town of Temirtau and Karaganda region in general. Apart from being the largest employer in Kazakhstan, employing over 20,000 people, Ispat Karmet also supplies hot water and electricity to the city of Temirtau as well as providing significant social and cultural contributions to the people.