Industry Captains Sum up the Results and Give Advices
A year ago at the opening of the first International Mining and Metallurgical Congress AMM 2010, The President of Kazakhstan assigned the miners and metallurgists to increase the production volume by twice, compared to the level of 2008. The FIID program comprised such large projects as steel production increase from 4 million to 10 million tons per year, ferrochrome – to 440 thousand tons per year, aluminum – to 250 thousand tons per year, etc. It is obvious that the program’s success in the MMS area directly depends on the “well-being” of large players and the projects implemented by them. It is them who must become a basis for the creation of small and medium enterprises involved in the production at the higher processing stages. In this regards, today we asked the top-managers of leading companies that supported the AMM 2011 to answer the three questions by sharing their opinion with our magazine’s readers concerning the situation in the industry and by telling what kind of contributions their enterprises are ready to make for the solution of the tasks facing the MMS of Kazakhstan.
1. What is your opinion about the situation in the Mining and Metallurgy Sector of Kazakhstan?
2. What steps should be taken in order to give a new impetus to the development of your industry?
3. What contribution can your company make in this process?
Doctor Frank Pannier, CEO ArcelorMittal Temirtau, Kazakhstan
1. The Mining and Metallurgy Sector remains one of the locomotives of Kazakhstan’s economy. This sector accounts for about 7% of the GDP and 20 % of the country’s export. Around 300 thousand people are employed here. The industry is responsible for over 30 projects within the FIID Program worth more than 1.6 trillion tenge. The government has helped the industry sail through the time of acute crisis in 2008–2009. Now it needs to focus on developing transport infrastructure, so as to eliminate any barriers for the industry, as well as on stimulating domestic demand for steel products.
2. When we first came to Kazakhstan 95% of our products was exported far abroad and only 5 % was sold in Kazakhstan and in the CIS. Presently, we sell over 50% of our products in the domestic market and across the CIS. We produce flat products in Temirtau and large-diameter pipes for the oil-and-gas and construction industries in Aktau; we are planning to launch the production of long products soon. If we look at the domestic market it is very important to us to see growing demand on the part of the main metal consumers, such as the construction, machine building, and metal working industries. If we talk about exports, one of the most critical factors for maintaining the competitiveness is the cost of transportation by rail and availability of rolling-stock.
3. We are conducting a large-scale modernization under the FIID Program so as to expand the annual production to 6 million tons of steel and launch the production of long products by 2015. For the capacity expansion to be successful we need to be able to match the added capacity with the demand in the domestic and export markets. Besides, we need to increase the output and production capacity while improving our health and safety track record. We have not yet achieved our H&S objective – zero level of injuries – but we are moving in the right direction.
1. The Mining and Metallurgy Sector of Kazakhstan is an integral part of the global market, therefore the influence of the global post-crisis recovery trends also affects the Kazakhstani enterprises. A distinctive advantage of the MMS of Kazakhstan is a rich mineral resource base. Here we should note a successful implementation of a balanced state policy. The economic development priority brought forward by the President Nursultan Nazarbayev is a point of supporting the uprising of the industry, and its mining and metallurgy sector, in particular.
A set of implemented measures allows not only for keeping but also for improving the global positions of the Kazakhstani metallurgy. The government encourages the companies that arrange the second, third and fourth processing stage. The large companies that earlier exported the raw materials already conduct an active investment policy. The production reequipment and implementation of the latest technologies allow for going to the new processing stages. And the ENRC projects are the good evidence of such trends.
2. The dynamic industry development requires a comprehensive approach. The industry requires a technologic modernization. The companies should expand their investment activity, carry out the production process modernization, implement advanced technologies, and make products of the higher processing stages. In addition to the technologic modernization it is necessary to invest in human capital assets. The employees should be properly trained in order to operate the new production technologies. The enhancement of the cooperation between the industrial enterprises and research centers and development laboratories could give an impulse for the industry’s development.
3. Throughout its existence the ENRC has been making its contribution to the development of the MMS of Kazakhstan. The assets development in Kazakhstan always had a key significance for our company, and therefore we invest in their expansion and support. Over the period of our activity in the country we have invested more than US$6 billion only into the production development and upgrading of facilities. Presently the Group’s medium-term capital expenditure program is $11.1 billion, $5.6 billion of which shall be used for assets developing in Kazakhstan.
The ENRC implements such large projects as the construction of a smelting plant No. 4 at the Aktobe ferroalloy plant, the construction of anode plant, restructuring of the power-supply units No. 2 and No.6 at the EEC, construction of a preparation plant and a plant producing hot-briquetted iron at the SSGPO.
In addition to that, the ENRC is known as a socially-oriented and liable company that operates for the benefit of its employees and local communities. We invest in the infrastructure development and implementation of the long-term healthcare, education, culture, and sports programs. Thus, around $58 million were invested in the implementation of the external social projects in Kazakhstan and Russia, and in 2011 the amount of investments in the external social projects reached $160 million.
Alexey Teksler, Chief Executive officer of JSC Kazakhaltyn MMC
1. Presently there are all necessary conditions for the industry’s development. The external one is that the global raw materials market is growing, and the internal one is the government support within the industrial and innovative development Program for 2010–2014. We see that the new projects have been initiated and the new work places have been created in Kazakhstan over the post-crisis years. However, this does not indicate the absence of the problems: expensive loans, low labor capacity, worn-out equipment, lag in using the modern technical solutions and production process automation. But all this is overcomable with the complex approach to the question of resolving such problems and with the government support.
2. A large number of questions the resolution of which affects the industry development are in the competence of the management and work collectives of the enterprises. There is a need for the government support in the questions of the fiscal stimulation of the research activity, timely VAT refund, systematic decrease of lending rates, and simplification of the subsurface resources matters management.
3. Over the last year the JSC Kazakhaltyn MMC almost doubled the finished product output, initiated several gold-mining projects, and created new work places. We have significantly increased the geologic exploration expenses, and intend to develop new production capacities in the future.
Bakhodur Zharov, Director of the representative office of the OJSC Polymetal in Kazakhstan
1. The Mining and Metallurgy Sector of Kazakhstan is devoted to recovery. Its prerequisites are the raw material, production and human resource potential of the republic as well as the favorable environment at the world markets. In the conditions of exiting the financial crisis the industry development, modernization of assets and management methods are obvious.
The Government has already claimed its serious intent to support the mining and smelting production sector. As it has been noted by the Director of the NWF Samruk-Kazyna Mr. Kairat Kelimbetov in April 2011 (presently the Minister of economic development and trade), the investments into the industry shall grow up to 40% of the total volume of investment in the country’s economy, and this indicator shall be reached by 2020.
When talking about the gold-mining its level increased by 44 % over the period from 2008 to 2010. Over the first four months of 2011 the production reached 15.2 tons. This is by 66 % better than the result of the same period of the previous year. Before 2008 and for seven years there was no growth noted since the producers tended to hedge their assets. However, with the occurrence of the confidence in the long-term and non-random character of the current price of gold; the acceleration and expansion of the production activity became more apparent.
2. The gold production level in Kazakhstan does not yet correspond to its potential. The reason is that having the reach subsurface recourses the republic has many refractory ore fields that are difficult to develop. A significant parameter of the positive effect from the precious metals price growth is also leveled by the increased price of the POL, chemicals, equipment, and labor forces. Therefore, in order to ensure the production growth it is necessary to implement the new approaches both in the work process organization and in the application of the ore processing techniques.
The attention should be paid to the development of the own scientific and research potential. As it has been noted by the Minister of Industry and New Technologies Aset Issekeshev, an important factor for increasing the gross value in the metallurgic industry shall be the creation of small productions with a deeper processing rate. In the course of developing and realizing the advanced technologies Kazakhstan must absorb and critically rethink the advanced experience of the engineering companies around the world.
The Republic requires a more thorough approach to the selection of partners. It is well-known that one of the reasons for the moratorium of licensing the new fields is the profiteering of the rights for using the subsurface resources. This was initially conducted by the companies that were unable or did not wish to invest in the long-term business development. Unfortunately, due to the growth of prices of gold and resources in general the interest of such companies in Kazakhstan kept increasing. Therefore, the matter of preliminary “filtration” of potential partners in the mining and smelting business is important like never before.
3. The key success factors in the mining and smelting sector of Kazakhstan are the availability of own engineering base for the correct project development, operational competency for achieving the long-term efficiency, as well as the experience and ability to work in Kazakhstan. Polymetal has it all and all this will be useful.