Avdiivka Coke Plant is one of the largest enterprises of its kind in Europe. In peacetime, the plant produced about 20% of all coke produced in Ukraine and several large steel enterprises today still depend on the plant. In fall 2014, Avdiivka Coke found itself on the front line between the Armed Forces of Ukraine and illegal armed groups of the so-called "Donetsk People's Republic." Most of Avdiivka is currently controlled by Ukraine, but the border is very close.
Over the last year, the plant has been shelled and stopped its main production facilities, its coke batteries, many times. Despite logistics and financing difficulties, each time coke production has been resumed. The publication Top-100 decided to find out what it took to do this from general director Musa Magomedov. The interview took place on 11 June on Skype since the plant is basically Musa Magomedov's home now. That day was quiet, and the director spoke from his office rather than from the bomb shelter. Behind his back, there was a souvenir ball with the signatures of Shakhtar Football Club players and a towel with the logo of Metinvest, the business group that the coke plant is part of.
The last year has been very difficult for the plant. When did you first realize that external factors went far beyond the scope of the normal situation? How did you respond to that?
We were first shelled on 21 July (Editor: 2014). There were not many shells, but there was fear and a lack of understanding about how we should fight. Later, we were shelled more intensely, which led to large fires; the benzene storage tanks were also hit by shells. Some artillery hit the main production shops. The situation was aggravated by the fact that we found ourselves on the front line between the Ukrainian army and the militants of the Donetsk People's Republic. Whatever was shelled, near or far, was ours.
So those were accidental hits?
We understood we were at the wrong place at the wrong time. The plant's overall system provided for redundancy: there were two gas lines, two main step-down substations (Editor: to transmit electricity from the grid to the plant), and four power inputs. Yet the conflict left us no chance. The last straw was damage to all four input lines (Editor: for electricity) and the coke gas line, which is used to generate electricity on site. In January, Avdiivka Coke was able to continue by generating its own power without external electricity sources. This time, however, damage to the gas line had extremely negative consequences.
This last attack that you mentioned did not look accidental?
It does not happen accidentally like that. I am not a military expert, but what we received many, instantaneous hits from far away. Experts from the observation mission say that artillery was five to six kilometers away. There is information about where they were shelling from. On May 21, 31 shells landed on the territory of the plant within just a half an hour period.
How did operations at the plant change under these conditions?
Avdiivka Coke has stopped 12 times over the year. With each stoppage, the condition of the batteries deteriorates because of thermal stress. With each shutdown, we lose certain number of ovens and have to refurbish them. If we are late with a refurbishment, a domino effect can happen: three furnaces might be shutdown today, four - tomorrow, and five - the day after tomorrow. We have increased our response time to non-standard situations. Our first major shutdown for mothballing took about three days, whereas the last shutdown was 3.5 hours. Why was that? As an example, the ovens have channels through which coke oven gas is collected. In the past, it would take us an hour to close this channel, but now it takes only five to ten minutes. We have been able to accelerate the process by using special techniques. This idea arose during the shutdowns. There are many techniques and they have become second nature. Each employee knows exactly what they are supposed to do.
That means you have developed some new internal documents?
Correct, instructions and guidelines on which actions need to be taken in situations like these. Every employee knows them like they do the "Our Father" prayer. For example, a shutdown took place on a weekend. The on-duty staff was there on site, but nobody waited for the shop manager to arrive and start giving instructions. They all knew what they were supposed to do. We realize that each shutdown is worth one year of a battery's life.
What is the condition of the equipment?
We currently have five coke batteries in operation and three batteries have been hot mothballed. We heat them with coke oven gas, which we get from the coke production process. We will try to put back into operation the mothballed batteries. I am absolutely confident that we will "wake up" battery #9 and 70% confident about battery #7. Battery #8, where the chances are 50:50, will be the most difficult because it is in the worst condition. One more oven, #832, failed recently, but until the last shutdown it was running fine.
Do all five batteries that are in operation produce merchant coke?
They do. They produce so-called wharf coke, which we then divide to get blast furnace coke, coke nut and coke breeze. We currently produce two types of coke: premium and standard quality coke. War is war, yet the quality of our products should be there regardless.
How much coke does the plant produce today?
5,300 (Editor: tons per day).
How has your logistics changed?
We had three railway routes going to Donetsk, Yasynuvata, and a less busy route to Ocheretino and Dnipropetrovsk. Now we're left with one route to Ocheretino, which is regularly being shelled and bombed. If we deliver coke to Azovstal or Ilyich Iron & Steel Works of Mariupol, for example, the products have to make a detour of about 600-700 km.
How do your secure supplies of coking coal?
Today we have more or less sufficient coal supplies. Krasnodon Coal, which accounted for 30-40% of the raw material we used in our operations, is one of our suppliers at the moment. We use coal mined by Pokrovskoye Mine Administration, Krasnolimanskaya Mine and state-owned Dzerzhinsk Coal and Yuzhnodonbasskaya 3 mines. The supply of coal from ports - American, Australian and Columbian - increased significantly. They are mostly supplied from Odesa using the same route (Editor - railway). That is why it is very important to organize timely deliveries. Any error or delay at the stations is critical. We continue to receive cheap gaseous coal from Russia. That accounts for about 10% of the blend. Steam coal, which is mined in Ukraine, is not used for making coke since it is used for internal power generation. This makes logistics easier since Russian coal comes from the north and does not overload the Prydniprovska Railway.
How do you build relationships with coke consumers given the fact that you cannot guarantee the stability of operations or supplies?
We have a full mutual understanding. We have two main customers: Azovstal and Ilyich Iron & Steel Works of Mariupol. They know we do absolutely everything we can. As soon as operations stop, we inform them immediately. Whether it's 1:00 am or 2:00 am, I call Yuriy Zinchenko or Enver Tskitishvili (Editor: general directors of Ilyich Iron & Steel Works of Mariupol and Azovstal, respectively) and say: "We have stopped operations, please cut back (Editor: production)."
We have daily briefings with all of the coke and steel makers. Everyone knows how their colleagues are doing. Whenever we need help restoring railway tracks or with other issues, we turn to each other. Mutual support and help keeps us all alive.
Which financial resources did you use to restore the enterprise? Loans from the Group's companies, banks or your own funds?
We haven't taken out any loans. Since we are part of the Metinvest Group, we have resources, equipment and funds. The loss we generate is heavy, but we understand that if we were alone we would have stopped production long ago. We do not view ourselves as a standalone plant left alone with its troubles.
Our utilization is 50%, but we are continuing to make all of our payments, send employees on vacations for 10% of the cost, and even provide milk at the plant.
There was only one day this entire time when salary payments were delayed. The reason was that First Ukrainian International Bank's vehicles were not able to get to us. We asked them to come later because the road was being shelled.
As far as the personnel, some have left. I heard that a large number of employees have basically been living on site.
When it became "intense," many people stayed here. The plant's total headcount is currently 3,877 people, of which over 2,000 people are living at the plant. In the plant's bomb shelters we had the wives and children of our employees and even people who had nothing to do with the plant. Together with the Let's Help humanitarian center of Rinat Akhmetov's Fund, we organized the evacuation of people, but there were some who refused to go. They would say: "We will not go; our home is here." I have not met more hard-headed (in a good sense of the word) people in my life.
We provide water and food for them. However, there were times when we had no electricity, no water, and when we didn't have anything. Zaporizhstal, ZaporizhCoke, and the enterprises in Krivyi Rih and Mariupol would send us food because they knew they had to save their own. Whatever was sent for the plant's employees was shared with the people in the city.
The difficulties have made the workforce even stronger. People are helping one another. We are all living as one family. We now know the names of our employees' children, whereas before I didn't even know they had children. Our children of this "regime" are running in the bomb shelters. It is summer now, and we sent some children to Schurovo, some to Sloviansk, and others to the sea. This is an experience we'd rather not have, but "we have what we have."
Has the number of personnel gone down?
We have (Editor: looks at documents) 648 people who have left the plant because they moved to a different place and 73 people are on a childcare leave until their children reach the age of 14. In total, 721 people have left the plant, which is 20% of our headcount. There was a time when employees were continuously leaving the plant, but we have enough people now who are willing to work.
Do you have people coming from other coke plants?
Most of them are not professional coke makers, but fitters or electricians. This led to significant changes in the quality of our personnel. Recently, we had an incident and I was investigating the causes. It turned out that a foreman had only one experienced worker on a team of eight people. The other seven were novices.
People with 5, 10 or 20 years of experience have gone, and in their place we have employees with specialised education (vocational school or college) but no experience working with such sophisticated equipment like coke ovens or coke charging machines. We will be organizing intensive training courses and moving employees from other shops where we have a little better grasp of the situation. This is yet another challenge.
Have you used any other incentives to get people to stay?
You won't believe it, but I come to the shops and talk to people every day and when I ask them "What do you need?," they say two things: "Work clothes and a ceasefire." So people understand the situation. In the first quarter, we had minus 350 million (Editor: hryvnias in net income in 1Q 2014). Recently, we increased salaries and everyone said: "Thank you, but even if you didn't raise it, we would stay anyway." People's consciences amaze me.
The perseverance with which they are willing to work and fight for the future of the plant is admirable. They are a role model for me.
How has the population of Avdiivka changed?
We had 35,000 people, of which about 8,000 have stayed. I talk to the city mayor every day - we have joint briefings on the restoration of the city. I can say with full confidence that we are doing everything to restore Avdiivka. We have involved engineering organisations to estimate the damage to municipal infrastructure. We paid them money, and now they are working at 57 sites. We have seen the results of this work at 17 sites. We are not talking about "cosmetics" like replacing window. We are restoring roofs and load-bearing structures. We are evaluating the situation with heating pipelines, which were damaged in several places. If we don't change these lines by winter, then the city will not have heating.
The company clearly understands that the city and the plant are connected by one umbilical cord. We understand that our employees and their families live in Avdiivka. At the same time, the city understands that if the plant stops, the city of Avdiivka will cease to exist and at best there will be a village called Avdiivka.
If the government does not help us, the plant cannot handle this alone. The sites that have been evaluated require UAH 65 million to repair the damage caused by the armed conflict.
Do you have any estimates of the damage to the plant?
We do, but these estimates do not include the damage from the last shelling, because we have not yet had time to calculate that. The losses from damage and the need to heat the batteries with natural gas amounted to UAH 218 million in 2014 and UAH 74 million in 2015.
What requirements do Metinvest and Akhmetov have for the plant to work?
Rinat Akhmetov's requirements are as follows: take care of the people, take care of the plant and restore the city. It is understood that the fulfilment of the production plan in current conditions is not the priority, unfortunately.
They say you have a small bunker in one of the shelters?
It is in the bomb shelter, where we have 50 workplaces setup for the administrative staff of the plant. I have one of the rooms near the dispatcher's room because I am still the director and need to have at least some benefits (Editor - laughing). Other people live in the room next to mine.
This shelter was built long ago during the Cold War for a nuclear war and was intended to protect from tactical strikes. The plant has been in operation since 1963. The shelters were built on three underground floors with two exits and a ventilation system. We never abandoned them. Even in peaceful times, we had the best shelter contests each year. People laughed but we would hold the contests anyway just to make sure the shelters were OK.
This current war is not the one they built these shelters for where they were expecting air strikes and people would have warnings. Now it is important that you can quickly get to a protected place. People have learned and understand that it is not correct to run to the shelter. When shelling starts, you should lay down quickly and get as low to the ground as you can. I was in situations like this many times. In times like these you forget everything and you are driven by the main instinct: "I want to survive."
How much time do you spend at the plant? Do you get out?
I live at the plant, but I have opportunities to get out to see my family. We have a rule with the chief engineer: at least one of us should always be at the plant. The same applies to shop managers and the heads of departments. Thing like weekends are forgotten now. We act in accordance with the military situation. When it's quiet, I can go. My son recently had his birthday and I could not go. My daughter will graduate soon. If the situation is OK and it's quiet, I will go for her graduation and congratulate my son on his birthday at the same time.
When I see your Facebook windsurfing pictures from several years ago, a question comes us: don't you want to leave all of this here and go to the beach for a month?
I do... but when I am here I can make decisions quickly and understand what I should do: run, hide, or wait until the shells land. Then I go and do it.
I like wind surfing, power kiting and skiing. I like living a normal human life. Yesterday, my work day started at 6:45 am and ended at 9:45 pm. Today it started at the same time and I don't yet know when it will end. This is absolutely a normal working day, though I do not consider myself a workaholic. I am a lazy fellow who has to work a lot (Editor: smiling). I hope the time will come when I can be lazy again and organize work properly.
This text was published as part of the Top-100 Rating (Best Top Managers of Ukraine)