The European Bank for Reconstruction and Development has approved a $35 million credit line to a foreign-owned steel mill in Donetsk oblast, marking the bank's first major loan to Ukraine's fast-growing steel industry.
The loan is expected to help ISTIL Ukraine, one of Ukraine’s smallest but most modern steel mills, implement further improvements aimed at boosting its competitiveness on the international steel market. Also, investments may help the mill become a stronger role model for Ukraine’s bigger, inefficient and aging steel mills.
The revolving loan marks the renewal of a $25 million EBRD financing credit issued to ISTIL Ukraine in September 2001.
EBRD spokesperson in Ukraine Anton Usov said the loan was approved on Nov. 2 and should be signed this year.
“It will be the largest project in Ukraine’s steel industry indeed, and the third-largest financing for a private sector company provided by the EBED in Ukraine,” Usov added. The EBRD claims to have amassed commitments of 1.6 billion euros in Ukraine as of October 2004.
ISTIL Ukraine is owned by International Steel & Tube Industries Limited, which also owns manufacturing units in the United States and Great Britain.
“ISTIL is a brand new steel mill, and therefore many people think that we don’t need further modernization,” said Abid Junejo, vice president of ISTIL Ukraine. “But they are mistaken – we have to keep on going with the new technologies in order to remain a modern mill.”
The five-year-old ISTIL plant accounted for about two percent of the nation’s steel output, but its modern production facility renders it a competitive advantage that the company wants to maintain. Ukraine, ranked as the world’s 7th largest steel producer, produced just over 33,000 tons of steel last year. Most of the country’s steel was produced by aging Soviet-designed steel mills scattered throughout the country’s eastern regions.
“Other Ukrainian mills were built in Soviet times and are doing modernization in bits and pieces,” Junejo said, adding that Ukrainian steel mills overcome their inefficiencies by virtue of an abundant local supply of cheap raw materials in the country used in making steel, such as ore and coking coal.
Company history
Formed by Pakistani natives in 1991 as Metalsrussia, ISTIL was originally a steel trader between the former Soviet Union and Southeast Asia. In 1996, Metalsrussia acquired a majority stake in the Soviet-era Donetsk Steel Works; ISTIL Ukraine is located on the premises of the larger steel works plant.
Donetsk Steel Works was restructured after capital investment by the ISTIL Group during 1997-2000, and the plant’s Ukrainian owners gained control over the mill, leaving the five-year-old facilities to ISTIL Group.
Today ISTIL Ukraine is 99.99 percent owned by U.S.-registered ISTIL Group Inc. and 0.01 percent owned by Odessa’s Metalsukraine Corporation Ltd.
The ISTIL group claims to have invested $100 million into the plant in the last five years.
A recent EBRD project statement praised ISTIL for serving as a model of efficiency and competitiveness on Ukraine’s steel market.
“The company has made a contribution to greater efficiency in Ukraine’s steel sector already as a result of the introduction of modern steel-making technologies in 1999-2001. The Bank’s financing will help to ensure that this process continues,” the statement reads.
“Although a small steel producer in terms of volume, ISTIL Ukraine is one of the few producers in Ukraine that uses modern production technology based on electric arc furnaces and a continuous casting process for a range of steel products,” the statement continues. ISTIL is the only modern steel mill in Ukraine that operates an electric arc furnace, a continuous casting machine and a blooming mill.
“The Bank’s financing would assist ISTIL in implementing its strategy of improving its competitiveness through the introduction of energy efficiency improvements. It will also enable the company to ensure the reliable delivery of large orders to its key export customers,” the statement reads.
Junejo said the ISTIL group has expanded aggressively in recent years, acquiring a merchant bar rolling mill in the United Kingdom in 1999 and a steel-rolling
mill in Milton, Pennsylvania, in 2000. The Donetsk plant’s output increased from 413,900 thousand tons in 2000, to 675,000 tons in 2003. About 366,000 tons of steel were produced in the first half year of 2004.
