Finnish Steelmaker Invests '544 Million to Expand Production

Outokumpu Oyj (Espoo, Finland), a leading Finnish steelmaker, has decided to invest ?544 million ($669.45 million) on the expansion of the company's steel production and ferrochrome manufacturing facilities. The company, which had deferred these plans earlier due to the global economic downturn, will invest ?440 million ($541.46 million) and ?100 million ($123.05 million), respectively, on its Tornio ferrochrome facility in Finland and its Degerfors stainless steel quarto unit in Sweden. The investment is expected to increase the company's ferrochrome production capacity at Tornio to 530,000 tons per year and create 120 jobs.

The augmentation will take care of internal requirements and meet needs from the global market. The expansion will help the company fulfill the growing demand from China. In fact, the company is likely to have more than 200,000 tons per year of ferrochrome available for global sales. The expansion is likely to be completed by the first half of 2013, and production will gradually increase through 2015. Under the prevalent market rates, the expansion is estimated to add about ?150 million ($184.51 million) to the company's operating profits.

Outokumpu's production of individually rolled and thick plates and quarto plates account for nearly 20 percent of the global supply. These products are used in energy facilities, chemicals and desalination plants. Outokumpu's investment in Degerfors will increase the facility's quarto plate production capacity by 30 percent to 150,000 tons. A new cooling bed and heat furnace also will be installed at the site. The expansion is likely to be completed by 2014, with cash flows commencing in 2012-13. Company sources say that the return on investment will be higher than the targeted 13 percent.

Experts have observed that Outokumpu uses coke in the production process, which is expected to increase carbon dioxide emissions by 270,000 tons. However, the company's state-of-the-art and energy-efficient technologies will help in the reduction of global greenhouse gases by 1 million tons per year.

Companies in Kazakhstan and South Africa use fossil fuels for ferrochrome production. Ferrochrome production is an energy-intensive process, and long-term pricing depends largely on the availability of power in South Africa. In the next few years, South Africa, which accounts for nearly 40 percent of the world's production of ferrochrome, is expected to augment its power generating capacity.

In a related development, Outokumpu announced the commissioning of a steel rebar facility in Sheffield, England. The facility, built with a ?10 million ($12.31 million) investment, will manufacture the company's proprietary LDX 2101 duplex-grade rebars. For the year ending December 2009, revenues of Outokumpu, which also services customers in petrochemicals, construction, transportation, energy, process and chemicals sectors, dipped by 52.3 percent from the the previous year to ?3.64 billion ($4.48 billion). During this period, the company also suffered an operating loss of almost $611 million.

According to the steel briefings published by MEPS International (South Yorkshire, England), in comparison to production figures of 2008, global stainless steel production in 2009 declined by 5 percent to 24.6 million tons. However, during the first quarter of 2010, the total global output was 7.5 million tons, which is 54.6 percent higher from the same period in 2009. The report forecasts that this fiscal year, global stainless steel production will reach 28.5 million tons.

While demand in Japan, Taiwan, South Korea, the European Union and the U.S. is estimated to slump 20 percent this year, demand from Russia and China will grow nearly 78 percent. During the January-March period this year, China's steel production was 2.4 million tons. During the same period, Russia produced 51,000 tons, which is a 36-percent increase from last year. However, the report cautions that steel prices will remain uncertain in developing markets. Producers in several countries, including India, the United Arab Emirates and Turkey, are reducing prices or offering rebates to increase sales.

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