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FEATURE - Legendary Soviet steel town begins to reforge image
By Samantha Shields
MAGNITOGORSK, Russia, June 26 (Reuters) - Alexander oversees the operation of a huge furnace smelting 9,000 tonnes of molten metal a day at one of the world's biggest steel mills here in Russia's Ural Mountains.
Like many of his fellow workers at the Magnitogorsk Iron and Steel Works he's content with his lot despite the threat to Russia's steel industry posed by U.S. import tariff policy.
"Wages here are pretty good by our standards, metalworkers earn $300 or $400 a month, I know that in Germany they earn $2,000 but in Ukraine it's only 50," he said.
With an annual output approaching 10 million tonnes, Magnitogorsk is Russia's biggest steel producer and in the world's top 20.
In its wartime glory days it produced the steel for every second Soviet tank and every third shell at its 60 square kilometre (23 square miles) combine, built during Soviet dictator Josef Stalin's first five-year plan.
But 10 years ago, after the Soviet Union fell apart, the town and the steel mill that lie on either bank of the Ural river at the foot of Magnetic Mountain, were struggling with old production equipment.
Choking fumes turned the sky brown in summer and the snow black in winter.
Magnitogorsk's traditional markets in the Soviet military-industrial complex had collapsed overnight and it was facing the wrath of European and U.S. steel makers accusing Russia of dumping cheap steel on their markets.
WEATHERING STORM OF U.S. TARIFFS
But today, in the mill's 70th birthday year, the old production methods are being phased out and Magnitogorsk's bosses say it is well placed to weather any storms that hefty U.S. import duties will cause in world steel markets.
U.S. President George W. Bush imposed the duties of up to 30 percent on some products in March to help the country's ailing steel industry.
Igor Vier, the mill's deputy financial director, said that in 1998 Magnitogorsk was selling around 1.5 million tonnes of steel a year to the United States.
But then the U.S. and Russian governments negotiated an export agreement which cut Russian shipments there to the bare minimum, and Magnitogorsk switched its focus to southeast Asia.
"We have not been selling more than 1.5 percent of our exports in the United States since the start of 2001," Vier said.
He was confident that a possible glut of unwanted European steel in Asia would not hit the firm hard because changes in railway tariff policies mean it would be able to use Russian Far Eastern ports that were previously not an option.
"I understand that EU countries are not standing aside and are selling in southeast Asia, but unification of tariffs will make the three Far Eastern ports accessible," he said.
Magnitogorsk currently moves most of its exports through Baltic ports.
Vier said the U.S. action has hit Magnitogorsk's plans to issue $50 million worth of additional Eurobonds this year as a follow up to a $100 million three-year issue at a 10 percent annual rate in January.
"The reason we did not hit the original issue target was because of the Americans, because of their politics. When they put barriers around their market of course all the Western investors became pessimistic about the future," he said.
Vier said the company was on course to gain a listing on Moscow's bourse, the Russian Trading System (RTS), by the end of the year.
AIR GETTING CLEANER
The air in Magnitogorsk is still not clean but is less acrid than when all the metal at the plant was produced in open hearth furnaces, brick ovens melting iron ore at 3,000 degrees Celsius (5,432 degrees Fahrenheit) used in steel making since the 19th century.
The process of phasing out the mill's 35 open hearth furnaces and replacing them with more modern basic oxygen converters began in the early 1990s.
Today five open hearth furnaces remain.
"We are planning to completely halt open hearth furnace production by 2005," said Mikhail Buriakov, Magnitogorsk's head of target planning.
He said the plant would aim in future to sell more steel on the domestic market, sentiments also expressed by Vier.
"We export a bit more than 50 percent of what we make at the moment, we need to export less, probably to move to a 30/70 ratio like they have in Japan," Vier said.
This month's decision by the United States to acknowledge Russia as a market economy, and growing chances of joining the World Trade Organisation will cut the ability of mills in other countries to keep it from their markets, Buriakov said.
"We had problems with anti-dumping suits before we got market status, we think this status should reduce them," he said.
Magnitogorsk's 70th birthday celebrations will take place on the old Soviet Metalworkers Day on July 21.
Pavel Shirshov is one of a group of veterans meeting in the town museum to plan some of the events.
"We live well enough here. When I came as a child in 1932 the winters were very cold and we still lived in barracks because the town wasn't finished," he said.
"We're all legends," said his friend Vladimir Morozov.
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