Annual Report 2013

Capital expenditure

Throughout the year, we continued our strategic capital expenditure projects, which are focused on increasing our share of high value-added products, enhancing our production capacity for premium products, and reducing unit costs.

in mln USDin mln USDin %

The majority of the strategic capital projects are undertaken in the Russian division. Our key projects are the following:

  • replacement of the open hearth furnaces with EAF steelmaking facilities at TAGMET aimed to reduce steelmaking costs, increase annual billet-production capacity up to 950 thous. tonnes and significantly reduce air pollution;
  • ongoing construction of a new Fine Quality Mill (“FQM”) at STZ.Commissioning is plannedfor 2014.

In order to increase sales volumes of higher value-added products and the share of premium threaded pipe,we implement several projects, the main of which are the following:

  • implementation of complex Pipe Rolling Shop 3 development programme at VTZ to meet increasingcustomers’ requirements for product quality control and to increase the share of OCTG pipe with premium connections;
  • installation of additional non-destructive testing equipment, the new hydro-press and pipe-threading facilities as a part of the programme to improve the quality of OCTGat SinTZ;
  • reconstruction of cold rolling mills, construction of protective gas furnace and slitter,which is the finishing stage of stainless steel pipe production modernization at ТМК-INOX;
  • new coating line construction at TMK NGS-Nizhnevartovsk;
  • installation of coupling threader at TAGMET;
  • installation of hydro tester for threading connections at the casing pipe production line at OMZ;
  • consolidation of threading operations at Midland, Texas;
  • expandingfinishing capacities at Koppel, PA, including heat treatment capacity increase andinstallation of additional non-destructive testingequipment.

In order to develop steelmaking facility and provide stable scrap supply,TMK-RESITA hascompleted its scrap yard construction.