The Severstal’s business model shows the component strengths which differentiate the company from its competitors.The model forms the foundation of how the company generates and creates value in the longer term. The company’s strategic priorities are then set to aim to develop the strength of the business model, and to move towards achieving the company’s goals.
It is one of the few international steel companies with a strong position in both, and has significant reserves of both. Severstal also has its own scrap collection facilities. Vertical integration provides cost advantages, reduces exposure to raw material price fluctuations and market disruptions, and ensures a reliable supply chain. It also provides market flexibility, allowing Severstal to move quickly for market opportunities, while adjusting to falling demand and economic downturn.
Vertical integration provides one of the key elements of cost-competitiveness. Additionally, with its largest production facilities located in north-west Russia, Severstal benefits from relatively low-cost supplies of electricity and natural gas and, in addition, generates a growing proportion of its own electricity. As one of the largest producers of steel in Russia, it also benefits from economies of scale. To maintain its cost competitiveness, Severstal makes capital investments and operational efficiency initiatives to improve productivity and cost-efficiency. As such, it now operates some of the world’s most advanced and cost-efficient steel production facilities.
A 44 per cent portfolio share of HVA products in Russia supports the growing automotive, manufacturing, machinery sectors as well as providing ready solutions for the construction and pipeline industries. Severstal’s main Russian production facilities offer easy access to the major steel-consuming markets in the central European part of Russia and the ports of the St. Petersburg region, and in the USA, Severstal is well positioned for the major steel markets of the world’s largest economy.
BSS comprises five key pillars: Safety, Continuous improvement, Customer care,People of Severstal, and Business standard. Since its launch in 2010, Severstal has realised significant improvements in lean production, overall operational efficiency and safety, and has delivered more than US$650 million of cumulative contribution to Severstal’s EBITDA, as per Company’s estimates. In 2012, the Business System contributed around US$400.7 million, including US $277 million in Severstal Russian Steel, US$115.7 million in Severstal Resources, and US$8 million in Severstal International, as per Company’s estimates.
Uniform standards are communicated through a Code of Business Conduct, while an Ethics Committee ensures effective feedback mechanisms. These uniform standards and corporate values form the basis of the Business System of Severstal and are crucial to achieving the company’s strategic goals: • Customer care • Efficiency and agility • Respect for people • Teamwork • Safety