Iron Ore and Steel

Russian iron ore production started in the 18th century. The earliest factories appeared in Tula (1712) and the Urals (the Demidov plant in Nizhniy Tagil, 1721), during the time of Peter the Great. The process of smelting iron ore requires a lot of cheap energy, and charcoal provided that in the Urals at first. When anthracite coal became available in the Donbass basin in the second half of the 19th century, the center of the iron industry shifted south. By the 1970s, the Soviet Union was the world's leading producer of iron ore, steel and pig iron, chromite, and manganese ores. Ironically, this was the time when the other leading world economies were shifting away from iron to titanium, plastics, and composite materials. Despite a very high volume of production, many Soviet ferrous metal technologies were energy-intensive, inefficient, and even obsolete. For instance, over half of all steel in the U.S.S.R. in 1988 was still produced with 19th century Siemens–Martin open-hearth furnaces— long before replaced with modern electric furnaces in the European countries and Japan. (Even more ironically, the electric method was in fact invented first … in the U.S.S.R.) In that same year, the Soviet Union lost more metal in production than was produced in Germany! Russia produced about half of all steel pipes in the U.S.S.R. Among other former Soviet Union (FSU) republics, Ukraine was by far the biggest producer. Once the reforms started, the industry entered a prolonged crisis throughout the FSU.

The overall production of marketable iron ore went down from 107 million metric tonnes (mmt) in 1990 to 78 mmt in 1995, but rebounded to 110 mmt by 2008. Russia was in fifth place worldwide in iron ore production in 2008, after China, Brazil, Australia, and India. The main area of production, yielding over half of all Russia's iron ore, is the Kursk Magnetic Anomaly in the Central district with four large ore deposits. Other iron mines exist in the Urals and on Kola Peninsula. Ukraine has very important iron ore deposits near Krivoy Rog in the south; its production is about 70% of Russia's total. Kazakhstan also has some significant iron ore deposits. Over 80% of all iron ore in Russia is mined via the open-pit method.

Steel production in Russia declined from almost 90 mmt in 1990 to a little over 74 mmt in 2008. Nevertheless, Russia remains a major producer of steel in the world (in 4th place after China, Japan, and the United States in 2008). The most important centers of steel production are in the European north (Cherepovets in Vologda Oblast, where Severstal is located), the European south (the Novolipetsk and Stary Oskol combines), the Urals (Nizhniy Tagil, Chelyabinsk, Magnitogorsk, Novotroitsk), and Central Siberia (Novokuznetsk). The Urals produce about half of all steel, pipes, and other ferrous metal products in the country. The Urals region uses coal from Karaganda (Kazakhstan) and Kuzbass (Central Siberia) and iron ore from Kursk and Kazakhstan, all of which requires a lot of long-distance shipping. All of the largest plants there were built in the Soviet period, but have since been extensively modernized. A few major battles among different oligarchs and local mafia clans for control of these assets took place in the early 1990s.

Today, Russia's iron and steel industry is a modern and powerful one and attracts worldwide investments. The Novolipetsk, Severstal, and Magnitogorsk combines were in the top 20 Russian companies by market capitalization in 2007, and their main owners are billionaires. Severstal recently purchased Rouge Steel in Dearborn, Michigan—the first acquisition by a Russian steel company inside the United States. At the same time, ArcelorMittal, the world's largest steel producer, has made some inroads into Russia (by buying coal mines) and especially into Ukraine (where it purchased Krivorozhstal, the biggest national steel maker).

Steel and iron production requires vast quantities of energy and is very polluting. For example, to produce 1 ton of pig iron, an average plant requires 1.2–1.5 tons of coal, 1.5 tons of iron ore, 0.5 ton of limestone, and about 30 tons of water. Private companies are well aware of this and are trying to improve efficiency and meet environmental standards by installing more efficient furnaces, adding better filters and scrubbers, and switching to new energy sources. For example, Severstal received the ISO 14001 certification in 2001 (this is the leading international standard of environmental quality). The company claims that its emissions of air pollutants declined by 70% in 10 years.