Metalloinvest Eyes Bigger World Share

GUBKIN, Belgorod Region — Metalloinvest, the miner founded by billionaire Alisher Usmanov, plans to quadruple output of hot-briquetted iron used in steelmaking with the aim of supplying over one-fifth of world output by 2015.
CEO Maxim Gubiyev said Metalloinvest would build several new HBI plants to raise annual output to 8.8 million tons by 2015, much of it for export to Asia, as part of a $10 billion-plus investment in its iron and steel production.
“We have the intention eventually to increase HBI capacity to 10.5 million tons per year,” he told reporters visiting the company’s Lebedinsky mine, the country’s largest iron ore mine.
The price of HBI, a freely traded form of processed iron fed directly into electric steel furnaces, has increased six-fold in the last five years as benchmark world iron ore prices have soared in response to soaring Chinese demand.
Metalloinvest accounted for 8 percent of world HBI production last year and, after launching its second plant this year, plans to increase this share to 12 percent in 2008.
“We supply mainly to Ukraine and the Far East, but we see prospects for future sales within Russia. Potential clients are already in place but unfortunately we don’t yet have enough HBI to satisfy demand,” Gubiyev said.
Metalloinvest runs two HBI plants at Lebedinsky, with total annual capacity of 2.4 million tons. Gubiyev said the company would this month select the supplier of the third plant, a 34 billion ruble ($1.4 billion) project set to launch in 2011. Among the potential suppliers is U.S. firm Midrex Technologies, whose executives were visiting to celebrate the launch of the second HBI plant.
Metalloinvest plans to float up to one-quarter of its shares in an IPO this fall. Gubiyev declined to estimate the firm’s market value, although he said in February that he expected it to be worth $30 billion by the end of 2008.
Usmanov, who owns 50 percent of Metalloinvest, last week agreed to an asset swap with Norilsk Nickel shareholder Vladimir Potanin that could result in Potanin acquiring 25 percent in Metalloinvest. Metalloinvest’s two steel mills rank it fifth in Russia in terms of output.