Scrap Metal to Domestic Market and Coal for Export
Editorial
Using regulatory mechanisms the government of Kazakhstan plans to facilitate the promotion of national coal to external market and stimulation of scrap ferrous and non-ferrous metal supplies to domestic market.
As a state support and improvement of competitive capability for national producers the government of Kazakhstan plans to release transactions on selling of scrap, and wastes of ferrous and non-ferrous metals from VAT. It was said on the 22 October by the Minister of Economic Development and Trade of Kazakhstan, Mr. Yerbolat Dosayev, when he represented a draft law “On Changes and Alternations to Some Legislative Acts of Kazakhstan on Taxation Issues”.
Developers of changes and alternations believe that these measures will lead to saving of budget costs related to VAT return on export of scrap and wastes of ferrous and non-ferrous metals. At the same time, they think, the measures will stimulate the domestic market to involve Kazakhstani metallurgical companies.
It should be noted that at the moment the scrap turnover in our country is about 5 million tons and it is steadily increasing. Herewith, as per the statistic data of the Tax Committee at the Ministry of Justice, only for the last 5 years the amount of reimbursement paid to the major exporter of scrap was about KZT 70 billion.
The other problem noticed by independent experts, is a legal ban for businessmen acting in the sphere of scrap turnover to use a special tax regime based on a simplified return. As a result, the volumes of scrap metal delivery and amounts of tax revenues reduced for more than 10 times at the suddenly increased export of scrap metal. Thus, in 2010 the total volume of scrap metal export to Russia was 30 thousand tons, but for 10 months of 2011 the volume exceeds the amount in 2.3 times. In this context, experts believe that it is required to end a ban for the use of a simplified return for individual entrepreneurs dealing with collecting of scrap and wastes of ferrous and non-ferrous metals which will help to cut volumes of shadow turnover at the market.
Meanwhile, the Ministry of Industry intends to draw Kazakhstan coal to the market of countries membered in the Common Economic Space and CIS using the mechanisms available in the Customs Union. This was stated in the speech of Mr. Aset Isekeshev, a Deputy Prime Minister, a Minister of Industry and New Technologies, when he addressed to a meeting at the VIII Republican Conference of Power Engineers on the 10th November. For this purpose, the department is working actively preparing the relevant regulatory framework. According to Mr. Isekeshev, this year, within the frames of the Customs Union, 14 interstate standards have been developed as well as the procedural rules of the CU on the Coal and Products of Coal Treatment. In general, in order to make our coal complying with the modern requirements it is planned to approve 42 interstate standards in the coal industry for the next three years.
In his turn, Mr. Bakhytzhan Jaksaliyev, a Vice Minister of the MINT, is sure that our coal industry is on the threshold of the strategic turning point: “The amount of investments into the industry will be about KZT 614 billion for the next decade, this includes KZT 260 billion aimed to new construction and implementation of innovative technologies as well as KZT 300 billion for upgrading of open and underground mining assets.”
According to Mr. Jaksaliyev, Kazakhstan stands to become major coal supplier against the increasing interest to coal all over the world. At the moment, Kazakhstan is in the top ten coal producers. Its share in the coal output is 1.7% of the world and about 15% of the CIS countries. Even now coal from Kazakhstan is purchased in Russia, Kyrgyzstan, Tajikistan, Uzbekistan, Ukraine, Bulgaria, Hungary, Denmark, Poland, Romania, Turkey and Finland.
As it is forecasted by the Ministry of Industry, by 2030 the improved coal export will grow almost three times with the simultaneous drop of high-ash coal supplies from 71% in 2011 up to 44% in 2030. Speaking of the coal mining, the volumes shall increase from 116.3 million tons up to 150 million tons for the same period.
For reference: the main coal reserves in our country are related with five largest coal basins in the Central and Northern Kazakhstan including over 300 deposits and mineral occurrences. Now there are 33 companies dealing with coal mining; the biggest of them are ArcelorMittal Temirtau JSC, Bogatyr Komir LLP, Eurasian Energy Corporation JSC, Angrensor LLP, Kazakhmys Corporation LLC, Shubarkol Komir JSC, Karazhyra Ltd. LLP, Maikuben-West LLP, Saryarka-ENERGY LLP and Gamma LLP.
Giant Building Up
One of the giants at the coal mining industry of Kazakhstan – Bogatyr Komir – plans to ship 44.2 million tons of coal in 2012. Obviously, the figure is higher than 43.4 million tons planned before. The increased mining and shipment became possible due to the growth of power consumption in the internal market and commissioning of additional power capacities, including block No. 8 at the Ekibastuz State District Power Plant-1.
At the same time, the coal shipment to Russia will be on the level of 2011 and make 15 million tons. This is related to the continued repair works and the Troitskaya SDPP and reduced consumption.
Speaking of the medium-term plans, by 2020 Bogatyr Komir wants to increase the coal mining up to 60 million tons. In addition, the company’s intention includes the signing of the contract on supply of coal to the Balkhash Thermal Power Plant (which is currently under construction) and Karaganda Heat Power Plant-4 as well as to some other power facilities.
Speaking of the medium-term plans, by 2020 Bogatyr Komir wants to increase the coal mining up to 60 million tons. In addition, the company’s intention includes the signing of the contract on supply of coal to the Balkhash Thermal Power Plant (which is currently under construction) and Karaganda Heat Power Plant-4 as well as to some other power facilities.
Taking these plans into consideration, the company is implementing a large-scale program on technical re-equipment according to which 4 excavators and 3 Caterpillar dump trucks (150 tons body capacity) for quarry operations were purchased in this year. In total, in 2012 the overall investments for the purposes were $65 million. In 2013 Bogatyr Komir plans to increase investments to purchase vehicles for 18% and invest up to $77 million. Starting since 2014 the amount will be not less than $100 million.
The increased investments are caused by the transfer of the company to the cyclical-and-continuous method. The method adaptation will cost about $300 million. As a part of the project, bend conveyors will be built for about 12 km in total and they will replace the railway drive. This will help to increase the labour efficiency for 25%.
It is planned to realize the project in two stages: the first one – up to 2015 and the second one up to 2017. By this time the production capacities of the company will grow up to 50 million tons of coal per annum (plus 8 million tons will be extracted with the new equipment).
It should be noticed that Bogatyr Komir LLP is owned by Samruk-Energo JSC (Kazakhstan) and RUSAL (Russia). The company extracts coal by open method in two coal strip mines; they are Bogatyr and Severny. The total commercial reserves of the two are about 3 billion tons of coal. The production capacity of the Bogatyr strip mine is 32 million tons and the Severny strip mine capacity is 10 million tons per annum.
New Rare-Earth Metals Plant Commissioned in Stepnogorsk
November 2, in Stepnogorsk the opening ceremony was held at a new production complex manufacturing bulk concentrates of rare-earth metals. The plant was built by Kazakhstani and Japanese joint venture of Summit Atom Rare Earth Company (SARECO).
Approximately $30 million were invested into the pilot production of rare earth metals. The financing was from founders of SARECO according to share of their participation in the JV equity capital: Kazatomprom NAC JSC (51%) and Sumitomo Corporation (49%).
The new plant is a complex of thermal and hydrometallurgical treatment of various raw materials. It was designed by scientists and engineers from Kazakhstan, Japan and Europe. The plant was built considering all requirements for environment protection. The technologies and systems of control applied at the plant guarantee the environmental friendliness.
The plant is designed to produce 1500 tons of TREO (sum of rear earth metals oxides), with the increase of production capacities up to 3 thousand tons TREO in 2015 and up to 5-6 thousand tons TREO by 2017. The most part of products will consist of rear earth metals of the heavy group, as it is called; this is most deficit and needed at the moment.
Herewith, the JV will not restrict itself by the project of the primary product only. By 2015, there will be selective production established on the territory of Kazakhstan, and some years later there will be a production of magnets based on rear earth metals.
The production of rear earth metals is a new sphere for Kazakhstan in the industrial and innovative development. This will help the country to take its own position at the developing market of rear earth metals.
At the plant opening ceremony the CEOs of Kazatomprom and Sumitomo Corporation signed an agreement on project, which will determine further steps on fulfilment of SARECO development strategy.
In addition, as it was stated in the Yomiuri (a Japanese newspaper) referring to the unnamed source, since January 2013 Japan plans to import 1.5 thousand tons of rear earth elements from Kazakhstan, which includes 20 tons of dysprosium used in electrical and hybrid automobiles. This will make 7.5% of the annual Japanese demand for rear earth metals.
As it is known, the purchase of rear earth metals was the main concern of Japan when in 2010 China stopped export of this strategically important raw material. Being the biggest producer of rear earth metals, with the growth of hi-tech industry, China wants to import the metals as well.
KSP Steel Get into Top Gear
Since 2013 the Pavlodar branch of KSP Steel LLP plans to get into top gear with the capacity at 270 thousand tons of pumping and compressor-type, casing and oil transportation pipes per annum.
KSP Steel is the first company in Kazakhstan with the completed production cycle on steel weldless pipes for oil and gas industry. The company’s capacities include steelmaking shop, pipe rolling and final pipe treatment lines. More than 7,000 people work at the plant. In 2011 the company produced 147.76 thousand tons of piping products.
The company supplies its goods to the domestic market, CIS countries (Russia, Azerbaijan, and Turkmenistan) as well as to far abroad, including the USA.
VostockMashZavod Restore Its Status
December, this year, VostockMashZavod JSC plans to produce steel car casting at the base of the re-constructed cast-iron shop No. 10. As it was said by Mr. Viktor Matochkin, an Acting General Director of the company, the project started 25 years ago, in 1987, but for the financial problems it was stopped for a long period and only from 2011 its fulfilment was resumed.
VostockMashZavod JSC is a part of Kamkor Group of Companies and it is the biggest engineering plant in Kazakhstan which has a wide-section production supplying mining and metallurgical companies of Kazakhstan, Russia and Central Asia. These are mainly replaceable units and spare parts for mining, quarry, processing and metallurgical stages as well as equipment for treatment and production of lead, zinc, aluminium, titanium, etc.
During his visit to VostockMashZavod, Murat Amirov, a General Director of Kamkor Repair Corporation LLP said that “for the years of crisis the plant lost its stock-list and the bay was occupied by other companies of Kazakhstan and Russia and now we need to take these positions back”.
VostockMashZavod JSC is a part of Kamkor Group of Companies and it is the biggest engineering plant in Kazakhstan which has a wide-section production supplying mining and metallurgical companies of Kazakhstan, Russia and Central Asia. These are mainly replaceable units and spare parts for mining, quarry, processing and metallurgical stages as well as equipment for treatment and production of lead, zinc, aluminium, titanium, etc.
During his visit to VostockMashZavod, Murat Amirov, a General Director of Kamkor Repair Corporation LLP said that “for the years of crisis the plant lost its stock-list and the bay was occupied by other companies of Kazakhstan and Russia and now we need to take these positions back”.
SAT & Company Continues Consolidation
SAT & Company JSC purchased 75.45% of ordinary shares in Temirtau Electrometallurgical Works JSC. The deal is a regular step to implement the consistent strategy of the holding to improve complexity, re-profiling and consolidation of its metallurgical assets. Thus, in 2009 the company became managers and in 2011 it completed the purchase procedure over Taraz Metallurgical Plant LLP where the ferroalloys have been produced since 2006.
By the start of 2012 the ferroalloys capacities of Temirtau and Taraz Metallurgical Plants achieved 80 thousand tons per annum. Herewith, by 2014 the value will be increased up to 100 thousand tons per annum. These scopes help SAT & Company to be a major regional ferroalloys producer.
The consolidation of production assets and resources base provides an opportunity to reduce marketing and managing costs. In addition, it considerably reduces the raw material self costs for mining entities of the holding.
The only thing to be added, SAT & Company plans to purchase the outstanding 24.45% of the Temirtau Electrometallurgical Plant at the first six months of 2013.
The Asaubayevs Will Acquire New Golden Asset
African Resources is partially owned by the Asaubayevs family (who are former owners of Kazakh Gold) and it wants to purchase up to 60% shares of Hambledon Mining (Great Britain), dealing with gold mining in Kazakhstan. At the moment the affiliated entities of African resources already possess 9.02% shares of the company.
As per the offer, the shareholders of Hambledon will be able to sell their shares at 2 penny per share which is 66% more than the securities cost at the close of exchange on the 1st November 2012 (1.2 penny). Independent members of the board of directors at Hambledon unanimously supported the decision. Hambledon total cost is GBP 19.6 million in accordance with the offer.
African Resources was established for the purpose of the bargain and it will provide operational and financial support for further development of Hambledon. In particular, it will be related to the gold mining at the Sekisovskoe deposit with 21 thousand ounces expected by results of 2012 and up to 100 thousand ounces by the end of 2017.
For reference, Hambledon Mining is developing the Sekisovskoe gold mine in East Kazakhstan. Besides, last year the company awarded an agreement on purchase of 100% share in Akmola Gold LLP (Kazakhstan) possessing rights for two gold-bearing deposits in the Central Kazakhstan; they are Tellur and Stepok. At the moment, Hambledon Mining is waiting for the refuse from the Kazakhstan government from the pre-emptive rights for the company.
As per the offer, the shareholders of Hambledon will be able to sell their shares at 2 penny per share which is 66% more than the securities cost at the close of exchange on the 1st November 2012 (1.2 penny). Independent members of the board of directors at Hambledon unanimously supported the decision. Hambledon total cost is GBP 19.6 million in accordance with the offer.
African Resources was established for the purpose of the bargain and it will provide operational and financial support for further development of Hambledon. In particular, it will be related to the gold mining at the Sekisovskoe deposit with 21 thousand ounces expected by results of 2012 and up to 100 thousand ounces by the end of 2017.
For reference, Hambledon Mining is developing the Sekisovskoe gold mine in East Kazakhstan. Besides, last year the company awarded an agreement on purchase of 100% share in Akmola Gold LLP (Kazakhstan) possessing rights for two gold-bearing deposits in the Central Kazakhstan; they are Tellur and Stepok. At the moment, Hambledon Mining is waiting for the refuse from the Kazakhstan government from the pre-emptive rights for the company.
Temirtau Air Will Be Cleaner
Installation of two hose filters was completed behind the cooling area of the sinter machine No. 5 at the sintering production of ArcelorMittal Temirtau JSC. Previously, electrical filters were installed but they exhaust their service life and the efficiency of their use dropped considerably.
The new hose filter has been successfully hot tested. First test measures showed the good decrease of dust emissions, and its concentration was only 12 mg/m3. Herewith, the purification rate at the new dust eliminating equipment hit 99.7%. According to Galina Drozdova, a Head of Environmental Department, this is a very good result considering the general rate for dust trapping equipment used as a guideline all over the Kazakhstan is at 50 mg/m3.
It should be reminded that the processing equipment at the sintering production is one of the main source for dust emissions at the works. There are 55 dust exhausting plants and 6 gas purification plants used at the production shops.
At the moment they are installing a back-up smoke exhauster and the attending staff is being trained. Also, in parallel, there are works performed to install hose filters at sinter machines No. 6 and No. 7. As per the company’s estimates the project should be completed in 2013, as it was planned, and it will help to avoid emissions of 1500 tons of dust per annum that will notably improve the ecological situation in Temirtau.
As the World Steel Association (WSA) reported, in January–October 2012 the international steel production was 1 277 million tons which is 0.7% more than the value for the similar period in 2011.
Speaking of the steelmaking by regions and countries the situation is as follows.
There were 60 217 thousand tons of steel produced in Russia (+5.1%), and 27 924 thousand tons of steel made in Ukraine (-5.7%).
Asian countries produced 831 009 thousand tons (+1.7%) of steel, including 602 225 thousand tons (+2.1%) in China.
The European Union demonstrated the dropped values up to 143 946 thousand tons (-4.7%). In particular, the production of steel decrease in Germany – up to 36 138 thousand tons (-4.4%), in Spain – up to 11 703 thousand tons (-13.1%) and in Italy – up to 23 266 thousand tons (-3.6%) while France showed an increase – up to 13 364 thousand tons (+0.3%).
Steelmaking plants of North America increased the production up to 102 451 thousand tons (+3.3%) including the USA – up to 74 866 thousand tons (+4.2%). Though in South America the decrease was registered – up to 39 510 thousand tons (-3.1%), including Brazil – up to 29 230 thousand tons (-1.8%). Speaking of African and Middle East countries, by WSA estimates, for the ten months of 2012 they produced 28 547 thousand tons of steel (+1.4%).
In its turn, MEPS, a British consulting company, forecasts that the peak stainless steel production will probably achieve at 34 million tons (+0.8%) by results of the year. In addition, if China increases its figures for 1.1% the countries of European Union will have an increase for 0.3% only.
On the copper market, the situation in China can be used as a guideline as Chine is the biggest consumer of copper in the world. According to Antaike Information Development Co (a Chinese agency), due to the weakened economic activity at the international markets, this year the copper consumption in the Chinese People’s Republic will demonstrate the growth for 4.8% only or up to 7.68 million tons; this will be the minimal increase since the Asian financial crisis. At the same time, next year, with the growth of economy, the copper demand in China will increase for 5.5% and it will hit approximately 8.1 million tons.
The growth of production capacities will be more compared to the current year, speaking of the Chinese copper and smelting branch. It will result in the increase of refined copper production for 8.9% or up to 6.1 million tons.
Production statistics for January–May 2012
According to the data from the Statics Agency, for the ten months of the current year there were 43 534 thousand tons of iron ore extracted in Kazakhstan. This corresponds to the level for the same period of 2011. At the same time, the copper ore production was 31 578 thousand tons (+11.8%), 4 104 thousand tons of copper-zinc ore (+17.2%) and 6 588 thousand tons of lead-zinc ore (+9.6%).
The production volume of black refined copper increased up to 301 454 tons (+8.5%) but the production of black zinc dropped, on the contrary, up to 265 712 tons (-0.3%). The production of non-refined steel reduced up to 3 310 thousand tons (-19.4%).
Ferroalloys production increased up to 1 430 thousand tons (+2%) for January–October this year. Flat-rolled products dropped up to 2 148 thousand tons (-15.1%), galvanized rolled products reduced up to 430 248 thousand tons (-17.2%), tinned steel sheets and tin-coated sheet products decreased up to 127 808 tons (-29.7%). The drop was also registered on refined lead, up to 74 109 (-23.9%).
At the same time, for the ten months of the year there were 33 010 kg of treated and untreated gold produced (+6.6%) as well as 791 070 kg of untreated and half-treated silver produced (+48.3%).
In January–October, the coal production increased up to 97 491 thousand tons (+3.7%). Herewith the production of hard coal and lignite was 93 338 thousand tons (+4%) while the coal concentrate was 4 153 thousand tons (-1.8%).
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