OREANDA-NEWS. December 17, 2007. ESTAR managing company plans to increase the production of steel blanks at the Volgograd CJSC Volga-FEST up to 1 mln t per year. The major part of the ESTAR products will be exported. Analysts believe that application of such strategy is justified as the domestic steel market has become virtually saturated.

ESTAR managing company announced its plans to develop the CSJC Volga-FEST purchased in July (Frolovo, Volgograd region). The investment program envisages an increase of square steel blanks production up to about 1 mln t per year. As Vladimir Lobko, General Director of ESTAR managing company, announced, the company will increase the production volume up to 480,000 t before 2011that implies an investment of 36.5 mln euro. The upgrade is planned to go in 2 stages; the volume of investments will be 25.5 mln euro before 2009 and 11 mln more - by 2011. According to ESTAR’s calculations, the overall payback period of the investments will be 6.5 years. It was also decided to construct the second arc furnace melting shop with a capacity of 500,000 t per year and install a section rolling mill at the enterprise. The major part of the ESTAR products will be exported.

The head of one of the Volgograd metallurgical plants believes that the purchase of a rolling mill could cost ESTAR 10-12 mln euro and the construction works could cost about 3 mln euro. As Kommersant's interlocutor believes, ESTAR’s orientation for ordinary steel grades is justified due to a high demand for them in construction both in Russia and abroad. The analyst of Troyka Dialogue, Sergey Donskoy, believes that in the course of the Volgograd plant’s upgrade ESTAR’s priority will be the domestic market. “In the next 5 years Russian market of steel of all grades will grow by 60%", noted Mr Donskoy. - ESTAR will possibly also direct the Volga-FEST products for processing at the Group's enterprises. Konstantin Romanov, analyst of Finam investment company, believes that ESTAR’s priority will be the international market because the domestic market is virtually saturated and the main manufacturers of metal products use their own blanks. “In the first 6 months of 2007 the Russian ferrous metal export fell by about 6% due to the growth of domestic demand and market entry of manufacturers from other countries, notes Mr Romanov.  - At the same time, the domestic market is virtually saturated, so focusing on export could be a strategically correct decision given lower production cost of the products”.