The Yuzhny Mining and Metallurgical Complex (YUGMK) is an enterprise of Russian businessman Yevgeny Yurchenko that has brought together the largest metallurgical and chemical coke production facilities in the Donbass. It was established in 2021. The YUGMK holding currently comprises eight branches: Enakievo Steel Plant, Makeyevka Steel Plant, Makeyevka Coking Plant, Yassinovataya Coking Plant and Komsomolskoye Steel Plant in DPR (Donetsk People’s Republic), as well as the Altchevsk Iron and Steel Works, the Lugansk Foundry and Mechanical Plant and the Stakhanov Ferro-Alloy Plant in the LPR (Lugansk People’s Republic). Interview with Yevgeny Yurchenko, the General Director of YUGMK, on the development of his company, business prospects in the DPR and assistance for the reconstruction of Donbass.
What are the prospects for the Donbass industry after the recognition of the republics by Russia?
Historically, the Donbass emerged and formed as an integral part of the Russian economy and industry. All the large and important industrial assets of the Donbass were built by Russia or the USSR, of which Russia is the legal successor. This means that the Donbass producers were originally part of technological processes designed and implemented by Russia. And the artificial seizure of these productions that took place in the 1990s led to their visible crisis and sometimes collapse. Obviously, the return of producers to Russia marks a diametrically opposed process. A win-win situation for Donbass and Russia. This is the conceptual answer to the question of whether DPR and LPR companies are expected in the Russian Federation.
In what areas can our industry be in demand in the Russian Federation and abroad, and what are the real prospects for the foreseeable future?
I am sure that the products of the region’s main industries, mainly metallurgists and chemists, will be in demand. I think that there are good prospects for agricultural producers in Donbass, although this is not the domain of our company, but an outside view allows such conclusions to be drawn.
The same can be said of potential buyers of products from DPR and LPR enterprises outside the borders of the republics and the Russian Federation. A number of our long-standing trading partners have long since tasted the quality and price of Donbass products. Today, for obvious reasons, they try not to advertise their contracts, but I assure you that agreements are being made and that the sums stipulated in the contracts are decent.
You recently participated in the Industrialists’ Forum in Ekaterinburg. What were the results, were any contracts signed, which companies are interested in cooperation?
Yes, a delegation from YUGMK participated in Innoprom-2022, the largest Russian forum where the top representatives of the real economy and leaders of Russian regions meet. I must emphasize that this was the first time that representatives of Donbass industry made themselves known at an event of this level. We are sincerely proud that we were able to achieve such a qualitative breakthrough and present our companies at such a high-level event.
I think the main result of the exhibition was a change in the world view of Russian business representatives thanks to our visit. I admit that many there still thought that Donbass was only a war zone, where the population needed humanitarian aid and that’s all they needed. They had no idea that real giants of the metal industry, capable of providing the market with quality products at very attractive prices, have been preserved and are operating successfully here. That is the first thing. Secondly, the leaders of the regions of Russia, who are responsible for restoring the various cities and districts of the republic, have considered us a strong and worthy partner in this activity. We have made a number of agreements that we will act together to restore the Donbass.
Tell us about the state of YUGMK. Has it been possible to get close to the pre-war production level during the year?
The temptation to compare the current level of production with the pre-war level is as great as it is incorrect. Being in Donetsk and other cities in the republics, reading the daily reports of shelling and being in the area of the arrival of Ukrainian artillery shells, one understands that it is impossible to maintain the level of production of the period when military danger did not threaten this land. Today, the fighting has made logistics difficult, there have been power cuts, and in some branches employees have had to leave their workplaces and go to bomb shelters. All this had a negative impact on the stability of our operations. Nevertheless, we can say that the situation in the YUGMK circuit, even under these conditions, is fully under our control; all production facilities are supplied and operating according to the approved production schedules. We are recruiting, and since the beginning of the year alone we have hired over 2,000 people. Overall, the state of YUGMK can only be described as positive. We are waiting for the end of active hostilities in the region for our companies to return to normal production levels.
What contributes to or hinders the achievement of these indicators?
I cannot list all the factors that prevented us from doing so. These include the hostilities in the region, which I have already mentioned. And the results of the management of the previous owners and investors – both the Ukrainians and those who came after them. And the physical wear and tear on the equipment and the morale of the teams that resulted from this management. Above all, I remember the moral and psychological state of the workforce, formed after months of stoppage and non-payment of wages.
This was facilitated by an intelligent and calibrated approach. The start of our investment and then production activities was preceded by a thorough audit of the assets that came under our management. We studied their potential, their condition and assessed the level of costs required to start operations. At the same time, we surveyed the market, studied and found niches for our products. We assessed the human resources available. A meticulously designed production programme was created and we started working according to it. The result – instead of scattered companies, condemned to be scattered over the territories, we got a vertically integrated mining and metallurgical holding that works.
You have stated that the holding as a whole is capable of producing 300,000 tonnes of pig iron per month. Is this a lot or a little compared to the Russian giants? Can you give some examples?
It is impossible to imagine a motorway with only heavy goods vehicles or only road convoys. It is not for nothing that there are different levels of transport equipment. The same applies to the steel industry. The production levels of these steelworks and foundries, which you rightly call “giants”, are higher than ours. But they also work for their own group of major customers, who then determine the workload, the output and the final cost of production.
Our volumes are based on our existing production base and can be described as industry average, allowing us to be agile, flexible and versatile in terms of order taking.
How many people work in all the subsidiaries today, and how many people have you hired since your arrival?
More than 22,000 people currently work in YUGMK Holding, not counting those involved in our activities as employees of subcontractors, logistics companies and others. Taking into account the employment multiplier that the steel industry has, the total number of people involved in our activities is in fact more than 100,000.
And the number of people in our workforce is growing all the time. In one year of operation, the number of employees has increased by more than 2,000 in the holding company.
You mentioned the possibility of internal management training, is this programme already underway?
It was noted on several occasions that the YUGMK project is considered to be primarily socially oriented, i.e. primarily aimed at maintaining and preserving the production and personnel potential of the Donbass region. That is why we make great efforts to develop our staff, not only to increase the number of employees, although we do that too, but also to strengthen motivation, increase the level of staff involvement in the company, develop professional qualities and skills.
We have established interaction and cooperation programmes with educational institutions at various levels. We train employees and specialists by offering them jobs and making them want to work in our plants.
Today, we can say with conviction that this set of training and recruitment programmes is bearing fruit; we are seeing an influx of new people into the branches in this particular sector.
But another very important result of this activity for us is the growth of patriotic feelings among our youth. If a native of Enakievo or Altchevsk finds a decent job that guarantees him a well-paid job, he will not think of moving to another city, another region or another country. He will stay here, he will live here, which means that the Donbass will live with him.
What damage was done to your businesses during the fighting and how was production affected?
As mentioned earlier, it would be impossible to ignore the reality of hostilities in the region even if we wanted to. If only because some of our subsidiaries, such as the Stakhanov ferroalloy plant in the LPR, the Yassinovataya coking plant and the Makeyevka steel plant in the DPR, were repeatedly bombed by the UAF, and their production facilities were badly damaged: workshops were damaged in Stakhanov, Yassinovataya and Makeyevka, and cables and electrical equipment were damaged in many places by Ukrainian shells. In addition, staff left their workplaces to take cover during the shelling, forcing production to stop.
However, in addition to the obvious damage caused by the bombing, Ukraine’s armed aggression has a systemic aggravating effect on the stability of the holding companies. These are mainly problems with the delivery of goods and the disruption of rail traffic on certain stretches, requiring the rapid re-routing of raw materials and finished products. Targeted shelling of power lines and substations by the Ukrainian army is causing problems with electricity supplies. In short, working in war-like conditions, with all the consequences that entails.
On the other hand, I would like to point out that a large part of our personnel has been mobilized to participate in combat operations to defend and liberate our homeland from the aggressor, and that we are still suffering from a lack of personnel.
Have many male workers gone to the front? Do they keep their jobs and wages, and will their seniority be maintained?
Across the holding, the number of mobilized workers is between 10 and 20%, depending on the branch. But despite the fact that our guys are now out of the factory floor, they keep their jobs and are regularly paid as if they were going to work. And we pay compensation to combat casualties.
A long and important reconstruction process awaits the Donbass. What kind of participation is your company prepared to take and in what volumes? Has this been discussed with the republican leaders?
Indeed, Donbass has suffered from Ukraine’s aggressive actions; the unprecedented bombardment of this region for eight long years has led to a visible impoverishment and deterioration of its infrastructure, the state of settlements, communications and various vital systems. All this has been slowly destroyed and bombed by Ukraine since 2014, and rapidly in 2022. Once the fighting is over, once the territories are liberated, we will inevitably have to start rebuilding our country. And in this effort, YUGMK companies, our staff and, most importantly, our products have no alternative.
It is obvious that no construction work can be carried out without steel structures, and we are ready to supply them to the market on an industrial scale. We, our steel plants in Altchevsk, Enakievo and Makeyevka, know how to produce the required range of steel products for construction. First of all, these are different types of long products – angles, channels, T-beams and other beams. Branch No. 3 of the Makeyevka plant is, I dare say, a world-class producer of wire and rebar of various diameters. All this will be required for the reconstruction, we will supply all this to the market. We even have crushed stone, which is also a material needed for construction. We produce it in Komsomolskoye.
As far as the support of the leaders of the two republics is concerned, let me remind you that the beginning of the external management of YUMGK via the existing business scheme was accepted by the heads of the republics, Denis Pushkin and Leonid Passetchnik. For a year now, all our activities have been in constant communication with the governing bodies of both states. The participation of the Yuzhny mining and metallurgical complex in the reconstruction of the DPR and LPR has also been discussed several times at this high level.
How long do you think it will take for the industry in Donbass to fully recover?
Making such predictions is a thankless task, especially when the fighting is not yet over. On the other hand, I note that it took us a year to bring back to life most of the metal production pole of the Donbass industry. I think that this time frame determines the order of magnitude of the time needed to fully restore the industry. It is certainly not decades. But a few years.