The sponsor, together with the auditors, has presented plans to address these impacts to ensure that the proposed project, upon implementation of the specific agreed measures, will comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow, and a Corrective Action Plan (CAP), covering the upgrade needs and their proposed timing, is attached at the end of this document.
The ISD steel operations have been developed over the last four years, with ISD first taking management control over the Alchevsk Metallurgical Works (AMK) (3.2 M tpa hot metal capacity) in 2002, and then obtaining ownership control of both this plant and the adjacent Alchevsk Coke plant in late 2004. Both these plants are located 40 kilometers west of Luhansk in the most eastern province of Ukraine. Later in 2003 ISD took management control over the OJSC Dneprovsky Metallurgical Works named after Dzerzhynsky (DMK) (3.5 M tpa hot metal capacity) operation which was under bankruptcy proceeding too. The bankruptcy was finally solved and ISD took full ownership control in January 2006. The DMK plant is located in Dnipropetrovsk approximately 350 kilometers west of the AMK plant.
The situation at the AMK and the DMK complexes are significantly different, as ISD has invested in upgrades of the AMK complex, while only recently taking the ownership role and started investing in the DMK plant. In the following the descriptions will therefore be divided between corporate issues, and issues related to the AMK/Alchevsk Coke plants, and the DMK plant respectively.
- Corporate environmental and social management system:
Until recently all the ISD steel related operations were located adjacent to each other, and the environmental, health & safety, and social managers could easily ensure full and open communication within the operation. This has clearly benefited the development of the AMK and Alchevsk Coke operations, which have both achieved significant upgrades over the last few years. DMK is in a different situation being located 350 kilometers further to the west. To integrate the DMK and AMK/Alchevsk Coke environmental, health & safety, and social management systems ISD needs to develop a corporate Environmental Management System (EMS) to a standard similar to ISO 14001.
It has been agreed with ISD that the company will appoint a dedicated corporate environmental director and provide the resources for developing the EMS system. The director’s most urgent task will be to initiate the EMS system and ensure the transfer of knowledge of best practice between the different plants, hereby ensuring that best practice is incorporated in the upcoming CAPEX and environmental, and health & safety upgrade projects.
The corporate EMS director will also need to establish and ensure enforcement of standards in relation to work place safety, including but not limited to reduction of dust in the work environment and appropriate lighting standards. These areas are in need of improvement.
- Alchevsk Metallurgical Works (AMK) and Alchevsk Coke:
Since its takeover by ISD the AMK plant has undergone significant planning and upgrading processes. Nevertheless the plant still has significant emission, discharge, and to some extent solid waste issues to deal with. These issues are described below together with the improvements already implemented.
The AMK steel and coke production dates back to around 1895 when the town of Alchevsk was founded and developed into an industrial center. Today the operations, lying on a gentle hilltop are partly surrounded by residential areas (south, east, and north east). This has resulted in residential areas located within the established sanitary zone and many of these having ambient particulate levels above the accepted limits. Over time an unknown number of residences have been moved out of the established sanitary zone, but during the later years (including those under ISD control) the focus has been on eliminating or reducing emission sources hereby potentially reducing the needed sanitary zone to avoid further resettlement.
Until now ISD has reestablished the operations of emission control systems, but the main emission sources are still in operation and will now be covered under the proposed CAPEX program.
The dominant particulate emission source is the sinter plant. This plant is equipped with dry cyclones, but their effectiveness is limited and the emissions range from 300-400 mg particulate/Ncm. As part of the agreed CAPEX program this operation will either be replaced with a new 11.5 million tons per year sinter plant emitting less than 50 mg particulate/Ncm, or the operation will be closed down and the sinter sourced from elsewhere by 2009.
The second most important air emission sources are the current open hearth furnaces (OHF) and the tandem furnaces. These furnaces also have particulate as their main emission, but due to the operational principles they also emit other significant pollutants like NOx, SOx, and heavy metals when present. ISD has therefore already taken the initiative to have all the standard OHFs replaced by two new state-of-the-art converters. These new converters (designed by Voest Alpine and under construction) have particulate emission controls with guaranteed concentrations below 35 mg particulate/Ncm in the primary extraction system, and below 20 mg particulate/Ncm in the secondary systems. NOx and SOx will be practically eliminated, compared to the OHFs due to the changed process. The last tandem furnace (better energy efficiency than the standard OHF, but with identical emission control problems) will still be operational after the initial CAPEX program is completed, but will be scheduled for closure no later than 2012, as part of the development of a new hot metal balance at the end of the initial upgrade program.
The third most important air emission load comes from the lime kilns. These kilns have a smaller air flow than the previously described sources but have particulate emissions in the order of 600-700 mg/Ncm. They will be replaced by two new lime kilns each with particulate emissions below 30 mg/Ncm. The new lime kilns are scheduled to take over by the end of 2007.
Finally, the emissions from the Blast Furnaces (BFs) will be reduced by installing new efficient control systems in connection with cold repairs, and installation of emission controls for secondary emissions, which primary occur during the tapping process. During these repairs the BFs will also be equipped with PCI injection (pulverized coal injection). By introducing PCI the consumption of coke can be reduced, and hereby the emissions caused by the conversion of coal to coke at the coke batteries will be reduced too.
Outside the scope of the CAPEX defined for the IFC investment, ISD is also planning for the installation of a series of power generators to utilize the low-calorific gas produced in the BFs and the new converter operations and Alchevsk Coke gas. The total air emission control program will bring AMK in compliance with local regulations, well within the World Bank guidelines, and will allow the sanitary zone around the plant to be reduced. This will reduce or eliminate the need for further resettlement.
AMK is also in the process of changing from ingot casting and reheating for billet and slab rolling, to continuous casting of slabs. This will eliminate the need for one reheating process, result in approximately 12% better yield on the hot metal, give better steel quality, and will allow further low-calorific gas to be directed to the planned power generators.
AMK is also working on minimizing its generation of solid waste. In this respect the dust from the BFs and the new converter operations will be collected and directed back to the sinter operation for reuse as raw materials. Slag from the production is further crushed and used as a cement additive and for other construction purposes. By introducing these recycling initiatives AMK was in 2004 utilizing 1.37 M tons of waste while only generating 0.86 Million tons. In the long run it is therefore expected that AMK can reduce the slag deposits created by operations prior to the ISD takeover.
The 1.4 M m3/month water needed for the AMK operations is mainly taken from a pond located approximately 12 kilometers from the plant, with a smaller part coming from a privately operated water supply system for Alchevsk. AMK has built a new water treatment station onsite to be able to recycle up to 97% of its daily process water need of 25 M m3/month. All water that is not recycled receives treatment, including a root-zone treatment before being discharged (0.2 M m3/month) to a local river. The discharge water fully complies with World Bank guidelines, but does at times exceed the local requirements. With the general plant upgrading, as described in the CAP, it is expected that the quality and quantity of wastewater reaching the treatment system will improve and the discharge will subsequently comply consistently with the local requirements.
The Alchevsk Coke plant is located adjacent to the steel operation and is sharing utilities with AMK. Alchevsk Coke is a well operated plant with good housekeeping, well maintained coking batteries, and minimal leakages of its seals. The current batteries are using wet quenching, but a new battery under construction will be equipped with dry quench and heat recovery. Alchevsk coke is hereby moving from well maintained traditional technology to state-of-the-art technology. The plant has full chemical treatment of its waste gasses and the coke oven gas is 100 % utilized for a combination of firing the coke batteries, power generation and steel plant production needs. The direct emissions at the coke batteries comply with the World Bank guidelines.
The coke operation has a special water treatment system designed to reduce the phenol components (phenol: 0.18 mg/liter after treatment) before the water is used in the wet quench system. There are no water discharges from the coke plant.
Both the AMK and the Alchevsk Coke plant have an inherent risk of undetected soil contamination caused by the many years of heavy industry operation. It has therefore been agreed that a soil and ground water investigation program will be defined and undertaken to determine the extent of any problems. Based on the outcome of the investigation it is expected that a remediation plan will need to be negotiated with the local authorities.
The AMK plant has satisfactory health and safety practices, although housekeeping needs to be improved in the areas now scheduled for reconstruction. The accident frequencies has shown a steady reduction from 1.00 Lost-Day-Accident/Million-Man-Hours (LDA/MMH) in 2002 to 0.83 LDA/MMH in 2005 in the AMK steel operation, but during the same four years there were seven fatalities. The fatality rate is relatively high (8.4 per 100,000 man-years, compared to 4.0 for American workers in 2003), while the frequency of non-fatal accidents is satisfactory and on a positive trend.
The Alchevsk Coke plant also has satisfactory health and safety practices and the housekeeping standard is acceptable throughout the operation. The accident frequencies have fallen dramatically from 1.46 Lost-Day-Accident/Million-Man-Hours (LDA/MMH) in 2002 to 0.46 LDA/MMH in 2005, during the same four years there were one fatality. The only fatality reported was experience in 2002 during a robbery against a salary transport (and can therefore not be compared against the normal work accident statistics), while the frequency of non-fatal accidents is satisfactory and on a positive trend.
AMK/Alchevsk Coke is currently employing approximately 24,200 people and is hereby a dominant employer in the 120,000 inhabitant town of Alchevsk. The current project and ISD’s business projections indicate an unchanged employment situation for the upcoming years.
- OJSC Dneprovsky Metallurgical Works named after Dzerzhynsky (DMK):
The DMK plant only emerged from its past bankruptcy proceeding in January 2006, and it has therefore not yet undergone any significant changes under the ISD ownership. The operations therefore still suffer from significant emission, discharge, and solid waste issues. ISD and the DMK management have used the period from the privatization was decided at the end of 2003, till January 2006 when bankruptcy ended, to prepare plans for overcoming these issues. The investment and upgrade program is impressive and will completely change the operation’s environmental performance.
The DMK steel production dates back to around 1890 and was reconstructed during the Soviet times. Today the town of Dniprodzerzhynsk has developed with residential areas mainly located to the west and south of the site, while the Dnipro River runs to the north of the site and an independent coke plant is located towards the east. Up to 6,000 residences in the city center of the town are located within the 1,000 meter sanitary zone. Here the ambient air quality broadly complies with local limits but does not comply with the WHO recommended limits for particulate and sulfur dioxide. The last major resettlement to move people out of the sanitary zone was carried out in the 1980s. Based on agreement with the local authorities the focus is now on eliminating or reducing emission sources hereby reducing the needed sanitary zone to avoid further resettlement.
By far the most dominant particulate emission source is the sinter operations, which has severely malfunctioning filters and significant diffuse emissions. The sinter plant particulate emissions are estimated at 80% of the total emission from the steel plant, although no precise measures exist due to its unstable and diffuse emissions. As part of the CAP program DMK will submit design specification for a new sinter plant by the end of 2006, and will by 2010 either have replaced the existing operations with a new sinter plant emitting less than 50 mg particulate/Ncm, or the operation will be closed down and the sinter sourced from elsewhere by 2010.
The DMK blast furnaces (BF) are scheduled for capital repair. BF #10 is currently undergoing repairs and will by the end of 2006 be operational with new emission controls. The new plant will include secondary fume collection for casting/tapping and ore yard operation, enclosed and extracted conveyors and loading bunkers and PCI for coal injection. The other BFs will follow one-by-one after this repair and will ultimately all be fitted with the secondary controls. The proposed time schedule is given in the attached CAP.
In contrast to the AMK operation the DMK plant had its OHFs replaced by two converters some years back. One of these converters was last year retrofitted by Voest Alpine, and is now operating with a well functioning primary emission control. The other converter is scheduled for a similar retrofitting within the next year. The only problem will thereafter be the secondary emissions, which the building was not designed to handle. ISD has been requested to carry out a study of the options for secondary emission control during this year. Based on the outcome of the study a reasonable timeframe for implementing a solution will have to be agreed.
The lime production is currently emitting flue gas with particulate concentration around 200 mg/Ncm. DMK has been requested to evaluate two options for bringing this emission in line with World Bank/IFC guidelines. If the current emission control filters can be upgraded to keep particulate emissions below 100 mg/Ncm, then this has to be carried out before the end of 2007, and IFC will accept this performance for continued operation. If the filters can not be upgraded to meet this level (only acceptable for existing operations), then DMK will need to replace the filters with new filters complying with the standard 50 mg particulate/Ncm requirement.
ISD is also planning for the installation of a series of power generators to utilize the low-calorific gas produced in the BFs and the new converter operations. This program will be initiated at the AMK facility, but will, if successful also be implemented at DMK. It is expected that the agreed upgrades to air emission control, which will bring the operation in compliance with the World Bank guidelines and local regulation, will allow the sanitary zone around the plant to be reduced hereby reducing or eliminating the need for further resettlement.
DMK has accepted that its solid waste handling needs to be improved. Initiatives will be taken to:
- contain or remove a deposit, which in the past has been created outside the permitted deposit areas,
- improve handling practice to avoid mixing of different waste types,
- permits have to be aligned with and obtained for the individual solid waste handling areas, and
- all solid waste has to be reused wherever possible.
These initiatives will all be completed within the next 20 months, and it is expected that DMK will be able to reduce the slag deposits created by operations prior to the ISD takeover.
DMK is using 18.8 M m3 water/month. This water is taken from the Dnipro River located to the north of the operations. Discharge water is treated in a 45 ha settling pond followed by a 45 ha aeration pond. The initial settling pond is silted up to the extent where it can no longer carry out its function and some water is discharged directly to the Dnipro River. DMK will immediate close the direct discharge releases and will start a thorough removal of silt from this pond, hereby reestablishing its function. The aeration pond is still functional but will need a check to ensure the system can fully comply with both the local requirements and the World Bank guidelines after the cleanup is finished.
DMK will also initiate a review of its internal recycling practices for process water. The current recycling rate is only 62% at DMK compared to 97% at AMK after their revamping and upgrading of recycling systems
DMK employs approximately 19,500 people and is a significant employer in the 270,000 inhabitant town of Dniprodzerzhynsk. ISD is bound to keep the overall workforce unchanged for a period of 5 years, as part of the privatization deal. Further the current project and ISD’s business projections indicate an unchanged employment situation for the foreseeable future.
Although the DMK plant seems to have a satisfactory occupational health and safety regime it is clear that the plant needs significant housekeeping improvements throughout the plant. The management is aware of this and initiatives will be taken in parallel to the upgrade program. The accident frequencies have shown a steady reduction from 1.26 Lost-Day-Accident/Million-Man-Hours (LDA/MMH) in 2002 to 0.99 LDA/MMH in 2005 in the DMK steel operation, but during the same four years there were six fatalities. As for the AMK operation, the DMK fatality rate is relatively high (7.8 per 100,000 man-years, compared to 4.0 for American workers in 2003), while the frequency of non-fatal accidents is satisfactory and on a positive trend.
