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. Last Updated: 07/27/2016

Europe to Aid Ailing Russian Steel Mills

Two European consulting firms have won a contract to examine ways to reorganize Russia's ailing steel industry, an industry source said Monday.

French Sofres-Conseil and Munich-based Roland Berger have been selected by the European Commission to help Russia restructure some of its biggest steel plants, said Leonid Shevelyov, deputy head of the state metallurgy committee.

"The tender winners will have to study possible ways of getting the steel industry out of the crisis in which it is now," Shevelyov said by telephone. The project would have a 2 million Ecu (about $2.4 million) budget and would be entirely financed by the 1993 TACIS privatization program.

TACIS, set to be officially launched this week, is the EC's technical assistance program to the newly independent states.

The steel-industry assistance program would have to be completed within 12 to 15 months, privatization adviser to the EC's Moscow representation Luigi Narboni said.

After a first selection of 40 steel plants, between three and five would be chosen for in-depth restructuring and would benefit from the European aid.

Among possible candidates are the giant Magnitogorsk, Nizhny-Tagil, Moscow, Cherepovets, Izhevsk and Achinsk steel combines.

Last month, the Magnitogorsk plant became the target of a $650 million investment project led by a consortium of Russian banks, car manufacturers and the Gazprom natural gas monopoly. The six-year modernization project includes the construction of a new $500 million cold-rolled steel plant, to be completed within two years and produce some 2 million tons of high-quality rolled steel annually.

Questions remain, however, over the consortium's ability to finance the massive project.

Russia's steel industry is hampered by outdated technology. Its output fell by between 20 and 25 percent in the first quarter of 1994.

(Reuters, MT)