The Magnitogorsk Iron and Steel Works Open Joint Stock Company (MMK) is one of the largest enterprises of the Russian steel sector accounting for about 20% of all steel products sold on the Russian market. The Company is a major steel making plant encompassing the entire steel production chain, from preparation of iron ore to downstream processing of rolled steel. MMK turns out the broadest range of steel products among steel making plants in Russia and the CIS. A significant portion of its output is exported to various parts of the world.

In 2008 MMK produced 11,957,000 tons of crude steel, 11,522,000 tons of hot rolled products and 10,911,000 tons of commercial products. This is 11% less than in 2007, when the Company reached the peak of production in more than 75 years of its history, turning out 12.2 million tons of commercial products. The slump was caused by the impact of the global economic recession on the Russian steel sector. MMK's 2008 revenue as reported under the Russian Accounting Standards (RAS) was RUR 226 bn, 19 % up on the 2007 results. The 2008 sales income was RUR 54 bn (107% against 2007), with net profit at RUR 10 bn. Thus, 2008 has become a record year for MMK in terms of revenue and sales income. The Company has maintained a high production level. Thanks to its diversified products range and flexible sales policy MMK has been able to derive maximum benefits from the favourable market situation of the first 9 months of 2008 and respond quickly to the market changes.

In recent years MMK has been the sector's leader in terms of investments in revamping and modernization, with the Company's capex volume in 2008 passing the RUR 32 bn mark. The last decade has seen practically all of MMK's main production divisions revamped, and many new high-capacity facilities installed, among them a two-stand reversing cold rolling mill (2002), two Russia's largest hot dip galvanizing lines (2002, 2008), a colour coating line (2004), two super powerful electric arc furnaces with an annual capacity of 2 m tons each (2006), three state-of-the-art, fully automated long products mills with the combined capacity of over 2 m tons of long products (2005-2006) and many others.

The global economic and financial crisis has taken a heavy toll of the steel sector and forced many companies to reconsider their investment plans. In particular, MMK has had to suspend several major modernization projects, with the exception of the Company's top priority project, the 5,000 mm Plate Mill. The contract for the delivery of equipment for the Plate Mill, together with a slab caster to supply the mill with input material, was signed in November of 2008 with SMS Demag, a world-renowned equipment manufacturer from Germany. When built, this mill will allow MMK to produce highly lucrative heavy-gauge plate up to 4,850 mm wide for the oil and gas sector (large-diameter pipes), ship and bridge building industries and heavy machines manufacturing. The Plate Mill, scheduled to go on stream in July of 2009, on the Steel-Makers Day, will be able to produce about 1.5 mtpy, including 0.3 mtpy of heat treated plate. This mill will be unique for Russia in that it will be the most powerful of all the similar facilities: the heart of the mill, the main rolling stand, will be capable of developing a rolling force of 12,000 tons. Besides, the mill will include the full set of in-line mechanisms and units, from the charging devices of the reheating furnaces to the coil-handling mechanisms at the finished product storage. In addition to the 5,000 mm Plate Mill, MMK management plans to complete the projects of the #6 continuous caster, #2 colour coating line and a secondary steel treatment unit.

The global economic crisis has lead to a fall in domestic and international demand for steel. This, in turn, has forced Russian steel producers to cut back on production. To overcome the negative impact of the crisis, MMK has developed a plan of crisis-combating actions approved by the Chairman of the Company's Board of Directors Victor Rashnikov. The plan includes several guidelines, such as negotiating price reductions for purchased raw materials, strict savings of all kinds of resources, but, first and foremost, preservation of the Company's workforce in the face of production cutbacks, in particular, through introducing new work schedules allowing to make maximum use of the freed-up personnel.

The Company's management has not abandoned the social focus which has always been MMK's hallmark. The total amount of wages paid to the Company's 24,123 employees in 2008, was RUR 8.180 bn, which works out to an average monthly wage level of RUR 27,793, 12.1% higher than in 2007.

Today there can be no doubt that MMK will weather the crisis. As Mr.Rashnikov said, "we have  everything needed to do that, namely, a positive experience of solving the most complicated problems, state-of-the-art equipment and technology, a strong competitive edge, and, most important, highly qualified personnel". And the implementation of the prioritized modernization projects will enable MMK to attain its main strategic goal, that of maintaining its long-term competitive position on the global market.