Severstal made one of its largest investments into the reconstruction of Riga Railroad Car-making Plant. This is a pilot project of Severstal in building a network of service centers in the Russian Federation and former CIS countries.

"The market of Baltic countries is of strategic importance to Severstal, as in the next few years we expect them to join the European Union. To assure future sales into the countries- members of the EU after 2004, we plan to collect statistics of regular shipments of Severstal products to this service center with view to use it as a proof of the existing standard. We expect that our sales volumes are included in the consumption volumes of the above region, which is very important in case of these countries joining the European Union," said Vladimir Krainov, the project supervisor and senior manager at Severstal' sales department.

As pointed out by Krainov, Baltic countries are important to Severstal, partly, because they are located at the intersection of goods and raw materials trade flows from former CIS countries and Western European technologies, partly because they are the closest to Russia Western market. On the other hand, we expect that these countries will serve as location points for assembly plants of large corporate clients, who will open their facilities in Baltic countries with aim to cut labor costs in an economically safe environment.

Riga's geographic location allows to make just-in-time deliveries by automotive transport of small amounts to small clients at short distances (up to 500 km). Additionally, there is a substantial cut in cost of base materials made at Severstal and their shipment to Riga. Riga Railroad Car-making Plant has good local railways and large facilities which are initially regarded by Severstal as a good infrastructure for transforming it into a service center for processing and sales of steel from the warehouse to clients located in the Baltic region.

According to Vladimir Krainov, the idea of rejuvenating Riga Railroad Car-making Plant and building a service center in its place its fully justifiable in terms of technology. "In January 2002, we invested into construction of a line of longitudinal cutting of rolled steel (made in Italy), with a capacity of 10,000 tones a month in order to attract clients in the Baltic region and Northern Europe, who have strict requirements to quality of products. The project also incorporates pipe production, stamping of parts for cars and making of electrotechnical products".