History

Upon first look at the map it seems that the plant is not located in the most appropriate place: iron ore or coal deposits are 900-1200 miles away. However, a closer look at the map leads to an understanding that the choice was no accident. The location of Cherepovets does have exceptional advantages. The city stands at the junction of the European north, the north-west and the central regions. The St. Petersburg-Ekaterinburg railway and the Volga-Baltic waterway create a major transportation hub. Accessibility of transportation allows to continuously deliver raw materials and fuel. Close proximity to Moscow, St. Petersburg, Nizhny Novgorod and other industrial centers provides good opportunities for sales of finished products and use of scrap metal of the entire region.

The possibility of constructing a large plant to supply the northwestern region with locally made steel became real after discovering of iron ore deposits of Kolsky Peninsula and coal deposits of Pechora in 1930-1933. Severe climate of the trans-polar region where the deposits lay and their remote location from industrial centers, made construction of the metallurgical plant as per traditional model «close to iron» or «close to coal» unsuitable. Researchers suggested that the plant is positioned at the intersection of trade flows of iron ore, coal and finished products near Cherepovets - place where Vologda-Leningrad railway crossed the Maryinsky water system.

On June 20, 1940, the USSR government and the central Committee of the Communist Party signed a resolution On Organization of Steel Making in the North-west of the USSR, which predetermined construction of Cherepovets Steel Mill. Dozens of research and academic institutions were involved in designing the plant and running laboratory and field tests of iron ore and coal, but World War II prevented these plans from coming to life.

Only seven years later the construction resumed, and thanks to the strenuous work of the builders it was finished. In 1951, the first shop was put into operation. It was the shop of metal structures (currently prefabrication shop). In May 1954, the heat & power plant was put into operation.

At 3:25 PM on August 24, 1955, blast furnace operator F. E. Drozdov drilled the taphole and a flaming stream of metal rushed out of the blast furnace. That was the first pig iron cast in Cherepovets. This day became Cherepovets Steel Mill's birthday. In February 1956, the first high capacity coke-oven battery began producing coke. Two years later the first steel ingot was cast. In January 1959, the blooming mill was put into operation.

In November 1959, the USSR government congratulated the builders and steel makers with the beginning of operation of the hot-strip mill, which was the largest in Europe at the time.

Cherepovets Steel Mill became a company with a complete metallurgical cycle.

In the following years, new steel making capacities were commissioned, including blast furnaces, electric arc furnaces, oxygen converters, rolling mills for sheets and section steels.

It is worth mentioning that Cherepovets Steel Mill was built at the time when a great variety of innovative technologies were emerging in the domestic steel industry. High pressure under furnace's mouth, high blasting temperature, fluxed sinter and the use of natural gas were introduced to the blast furnace shop. In steel smelting speedy technologies were developed. Automatic control of thermal conditions as well as the use of natural gas and oxygen were also introduced. The use of these efficient technologies allowed Cherepovets steel makers to dramatically improve all production and economic indicators.

At that time there were few workers, experienced in steel making in Cherepovets. They were recruited and trained on-site by engineers, blast furnace operators, steel smelters and rollermen from Novokuznetsk, Magnitogorsk, Nizhny Tagil and Zaporozhye. This experience was accumulated, processed and combined while people worked near blast furnaces, open hearth furnaces and rolling mills. Whatever was unnecessary was discarded and an original, distinct Cherepovets style was created. This style was soon recognized and gained respect among other steel companies in this country and abroad. Cherepovets steel makers were able to skillfully develop progressive technologies. The blast furnace operators achieved best results in using payload volumes of furnaces. Steel smelters were successful in getting high amounts of steel per square meter of the furnace bottom, and rollermen achieved the highest blooming mill's output. As a result, in 1962 Cherepovets Steel Mill stopped operating at a loss and tuned into one of the leading domestic steel producers. Steel products from Cherepovets won their shares of the domestic and foreign markets.

The unique raw materials (low phosphorus content in the ferrous quartzites from Kolsky Peninsula and low sulfur in the Pechora coal), first-class equipment and the use of numerous technical innovations quickly turned Cherepovets Steel Mill into one of the most powerful steel producers. On June 23, 1983 the USSR Ministry of Ferrous Metallurgy made a decision to reorganize Cherepovets Steel Mill into Cherepovets Iron and Steel Complex. The decision took into consideration complex structure and character of production.

On September 24, 1993 according to the decree of the President of the Russian Federation, the state-owned Cherepovets Iron and Steel Complex was registered by the municipal administration of the city of Cherepovets as Severstal joint-stock company.

Since 1993, Severstal has expanded to include steel operations in North America and Europe and a number of different businesses, including companies engaged in the mining of iron ore, coal and other minerals, car making, pipe manufacturing, metalware production, the manufacturing of steel furniture and kitchenware, financial and insurance services, construction and repair.

A brief history of the development of Severstal’s current business divisions, Russian Steel and Metalware, Severstal North America, Lucchini and Russian Mining, is set forth below.

Russian Steel and Metalware

Russian Steel and Metalware is the result of continual investment in niche and high-valued added products businesses in Russia.

Steel Production. In 2000, Severstal purchased Hot Rolling Mill 5000, or Mill 5000, from OAO United Heavy Machinery. Mill 5000 is the only mill of its kind in Russia that can produce strips for large-diameter pipes.

In 2001, Severstal and Arcelor formed the Severgal joint venture, which has a focus on high-quality galvanised auto body sheet products. In 2005, Russian Steel and Metalware completed construction on a new facility for the production of polymer-coated steel products, which began operations on the Cherepovets site in December 2005. In July 2006, Russian Steel and Metalware completed construction on the Izhorsky Pipe Mill, a project designed to produce large diameter pipes with three-layered anti-corrosion coating of a type not currently produced in Russia and meeting the requirements of domestic and international gas and oil customers.

Metalware. Now the principal operating company of Severstal’s metalware segment, Severstal-Metiz was created through a series of acquisitions throughout the last decade. In February 2006, Severstal acquired a 60 percent ownership interest in the Ukrainian wire and metalware producer OAO Dneprometiz, or Dneprometiz. Severstal also obtained an option to purchase, after one year, an additional 27 percent stake in Dneprometiz. In April 2006, Russian Steel and Metalware acquired a 100 percent stake in British wire producer Carrington Wire, or CWL. CWL is an international wire manufacturing company that, in 2005, supplied over 50 countries worldwide and has of production capacity of more than 200,000 tonnes of wire per year.

Severstal North America

Severstal North America was created when Russian Steel and Metalware acquired substantially all of the assets of Rouge Steel in January 2004. Rouge Steel had been in the steel manufacturing business since the early 1920’s, first as a division of Ford and later as a subsidiary of Ford. In 1989, Rouge Steel was sold by Ford. Difficult market conditions in the United States steel market beginning in 1998 were exacerbated by production outages related to a powerhouse explosion and a fire at one of Rouge Steel’s joint ventures. This caused significant operating losses and put considerable pressure on Rouge Steel’s liquidity. In October 2003, Rouge Steel filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, following which substantially all of its steelmaking assets were acquired by Russian Steel and Metalware.

Lucchini

In April 2005, Severstal acquired a 19.9 percent stake in European steel producer Lucchini S.p.A, or Lucchini, and the selling shareholder acquired a 41.92 percent stake. The acquisition was structured such that Severstal and the core shareholder obtained an aggregate 61.9 percent voting control of Lucchini. In May, June and November of 2005, the selling shareholder acquired an additional 8.85 percent of Lucchini, giving it a total share holding of 70.81 percent. In October 2006, Severstal acquired a controlling stake in Lucchini.

Severstal Mining

Severstal Mining is the result of a series of acquisitions over the last 12 years.

In June 2006, Severstal acquired controlling interests in Karelsky Okatysh, Olkon, Vorkutaugol and Kuzbassugol from the core shareholder in a form of a share swop.