Lucchini

Lucchini is the second largest steel group in Italy and one of the largest European producers of special quality steel long products, with 20 plants and service centres throughout Europe. With more than 600 customers in six niche markets, including automotive, rails, bearings, springs, wire rod (nuts and bolts) and wire rod (welding), Lucchini’s steelmaking capacity of 4 million tonnes per year. In 2005, Lucchini’s total production was 3.4 million tonnes of crude steel and 3,3 million tonnes of finished steel.

Lucchini comprises the Piombino business unit and the Ascometal business unit. Piombino is a leading European producer of rails and high-quality wire rods; Ascometal is a leader of high-quality, tailored products, such as ingots, billets, blooms, bars, wire rod and drawn wire.

Strategy

Lucchini’s strategies include the following:

• continue emphasis on diversified customer base;
• focus on customised, high-quality products (automotive, machinery, appliances and rail); and
• leverage synergies with Severstal.

Facilities

Piombino. Piombino has an overall production capacity of 2.9 million tonnes of crude steel and 2.2 million tonnes of long products per year.

The Piombino plant’s production facilities include one coke oven battery with 45 ovens and an annual capacity of 530,000 tonnes, one blast furnace with an annual capacity of 2.4 million tonnes of crude steel and three basic oxygen converters and four continuous casting machines: one for slab casting with an annual capacity of 800,000 tonnes and three for billet and bloom casting of various sizes and shapes.

The rolling facilities include one rolling mill for rails, one for wire rod and two for bars. The Piombino plant is located near a seaport and has its own dock with loading equipment for all types of raw materials and finished products.

Lucchini’s Trieste plant has an installed capacity of 800,000 tonnes of crude steel per year and focuses solely on the production of high quality pig iron. The plant consists of one coke oven battery, one sintering plant, two blast furnaces (one of which is currently idle), each with an annual capacity of 400,000 tonnes, and a casting machine.

Lucchini’s Lecco wire-rod plant consists of a single rolling mill, with an annual production capacity of 330,000 tonnes.

Ascometal. Ascometal is a European leader in long speciality steel operating and operates four integrated EAF-based plants, two cold finishing centres and a distribution centre in France. Ascometal’s facilities are strategically located near scrap collection and processing centres. Ascometal has a production capacity of 1.2 million tonnes of special bar quality steel.

Steel Production Facilities, Lucchini – Output by Unit

Plant	2003		2004		2005
Piombino	(thousand tonnes)		(thousand tonnes)		(thousand tonnes)
Coking plant	903		921		932
Blast furnace	2,165		2,212		2,198
Continuous casting (steel prod.)	1,876		1,924		1,883
Rollings mills (finished goods)	1,276		1,376		1,134
Ascometal
Continuous casting + ingots (steel prod.)	1,109		1,161		1,154
Rollings mills (finished goods)	948		971		970
Total steel production	2,985		3,085		3,037

Products

Lucchini is a European leader of long specialty steel products, including round bars, rolled blooms and billet and flat products and is a leader in the Italian market for high quality wire rod, including drawing wire rod, cold hedging steel and welding steel. Lucchini also has an approximately 20 percent European market share and an approximately 80 percent domestic market share for rails and rail stocks.

Hot-rolled products. Lucchini produces more than 1,200 sizes and cross-sections of over 1,200 different brands and qualities, including wire rod, rolled billets, round bars, square bars and slabs. These products are used for a variety of applications, including automotive, mechanical and manufacturing industries, construction and infrastructures, electrical household appliances and the railway sector.

Cold transformed products.  Lucchini manufactures drawn, peeled, ground or shaved products and re-rolled strips. These products are used within the automotive, mechanical and fine mechanical industries and are characterised by a high degree of customisation, reliability and product finish.

Semi-finished products. Lucchini manufactures goods intended for rolling long products made of quality and specialty steels (billets, blooms and ingots), for direct stamping (billets and blooms) and for the production of forged items (ingots) and rolling flats (slabs).

The main users of these products are foundries and the iron and steel industry. Ingots are used by the utilities, aerospace, offshore, shipbuilding, petrochemical and infrastructure industries.

Supply Chain

The principal raw materials used at Piombino are coal, iron ore, coke, scrap and ferro-alloys. The main raw materials required by Ascometal are scrap and ferro-alloys.

Raw materials. The raw materials used by Lucchini vary across its operations and include iron ore, coal, scrap and ferro-alloys.

Piombino. Iron ore and coal are imported from third parties under short and long term contracts, subject to annual price negotiations. Coking coal is sourced mainly from Canada, the United States and Venezuela. In 2006, Severstal Mining started to supply hard coking coal and PCI coal to Piombino. Furthermore, approximately 90 percent of metallurgical coke requirements are currently produced internally, with the remainder imported from China and Ukraine.

The scrap required by Piombino is supplied mainly by BICOMET in Italy and also by other international traders. Ferroalloys are purchased on both national and international markets, leveraging volume bundles with Ascometal.

Ascometal. For scrap, Ascometal relies on a network of approximately 100 suppliers, the largest of which represents 20 percent of the total supply and the next two largest represent more than 10 percent of total supply. To benefit from volume discounts, ferro-alloys are purchased by bundling orders (where possible) with Piombino.

Energy. The Piombino operations purchase natural gas from ENI. Enel supplies 50 percent of Piombino’s electricity requirements, the remaining 50 percent being provided by power plants fuelled by gas recycled from Piombino’s own plant operations.

Ascometal purchases its electricity and natural gas from Electricite de France and Gaz de France, respectively. The Le Cheylas (Allevard) plant produces part of its own electricity through four hydraulic production facilities (140 GWh per year) and sells its excess production to third parties.

Logistics. Lucchini benefits from the strategic geographic locations of its major plants and uses a combination of sea, rail and road as means for transporting its goods.

Piombino. The logistics for the Piombino facility are primarily organised through a seaport with a deep harbour, allowing mooring of ships up to 72,000 tonnes and draught of 11.9 meters. The Piombino plant also has 3 berths for ships of up to 30,000 tonnes with maximum draught of 9.2 meters. The total carrying capacity of these berths is 100,000 tonnes of goods per month. The rail capacity allows the plant to deliver around 60,000 tonnes per month and road capacities allow the delivery of 70,000 tonnes per month. The Trieste plant has its own berth for discharging raw materials and loading coke, pig iron and iron ore. The plant also has a seaport with a maximum draught of 12.62 meters, which is used by Panamax vessels. The railway and road transportation capacities of the plant are approximately 15,000 and 10,000 tonnes per month, respectively.

Ascometal.  Ascometal uses a combination of road shipments, railway shipments (13,500 tonnes per month) and sea shipments (6,600 tonnes per month) to transport its products to its customers and receive its raw material shipments.