Danial Akhmetov
Governor, Pavlodar region

    The Pavlodar region is an industrially developed region in Kazakhstan. There are large enterprises of the metallurgy, machine building, energy and mining industries operating there. Among them are the Aksu Ferroalloys Plant, a subsidiary of TNC Kazchrome, Aluminium of Kazakhstan JSC, Ekibastuz coal basin, Kazakhstantractor association as well as a petrochemical plant. These enterprises are a pillar of our region’s industry. We also have companies with the Russian capital participation. Supplies of electric power and Ekibastuz coal to Russian regions give a glaring example of integration processes. In its turn our region receives mining equipment, units and machinery sets for power-generating installations. We are cooperating with Russians in many other fields as well. The mutually beneficial cooperation will certainly continue developing.
The structure of the region’s industry was formed between 1960 and 1980 and it has a solid resource base. On the whole, it is characterized by the dominance of raw material industries, i.e. by enterprises, which produce coal, alumina, ferroalloys. Their share averages 40 %. The volume of electric power is high (between 20 % and 30 %) and the manufacturing industry accounts for about 20 %.
All enterprises of the mining and manufacturing sectors, which include the metallurgy and metal working, were formed as being of the All-Union importance and were oriented on economic integration with other republics of the USSR, mainly with Russia. The scheme of establishing the interrelations of industries in the Pavlodar region was as follows. Coal of the Ekibastuz basin (Bogatyr, Vostochny and Severny open-cut pits) is supplied to the region’s electric power stations (by the way, energy enterprises there consume up to 35 % of Ekibastuz coal). In their turn the stations are providing the republic’s consumers with up to 55 % of generated power. Major consumers of electric power include our ferroalloys and aluminum mills, tractor making and petrochemical plants, i.e. those enterprises that form the region’s industrial base.
So, the existing structure of the real economic sector is connected to the natural resource potential of the region. At the same time the established production base had technological ties with enterprises of the Russian Federation and they are largely kept till this day. It is proved by the foreign trade turnover of the Pavlodar region with Russia, which today amounts to about 70 % of the total goods turnover.
In the nearest 10 to 15 years the material base of the regional economy will hardly undergo any significant changes. Nevertheless, the mining, power-generating and metallurgical industries are becoming a foundation to form new facilities and develop the available ones, which are making end products, i.e. those of the metal working, construction, machine building, chemical and petrochemical industries.
In this connection I would like to stress that in the new economic conditions development of the mining industry is the most promising direction for our region. Since this sector is represented mainly by coal enterprises, its further consolidation depends to a large extent on increasing capacities of the region’s power-generating enterprises. And the development of the power industry requires expansion of the sales market partly through enlarging power-consuming metallurgical, petrochemical and machine building enterprises.
However, we are facing the problem of decreased demand for Ekibastuz coal both in domestic and foreign markets. For example, volumes of coal shipments to Russia fell down by 2 million tons. At the same time the structural analysis of the industry in the Pavlodar region proves its high dependence on the state of the mining and power industries. So, we are studying now available options of reducing this dependence.
There is a conceptual program called «Ekibastuz coal» aimed at supporting coal mining enterprises. The region’s leadership made a proposal: to put questions of export shipments of Ekibastuz coal on the agenda of the intergovernmental commission of Kazakhstan and Russia. I think that points of mutual interest will be found. Simultaneously, our enterprises are making efforts to reduce ash content of coal and its prime cost by introducing new technologies of mining and processing.
There is one more related problem that has to be solved. The enormous potential of the power-generating complex demands expanding markets of electric power sales including those outside the republic. At present, the work is underway to set up a joint Kazakh-Russian enterprise on the basis of the Ekibastuz hydroelectric station-2. This project is advantageous to both sides since the cost of generated electric power will be reduced. That is why construction of the third block at the Ekibastuz hydroelectric station-2 will be started soon. By our estimates, the project will attract investments of over $100 million.
The dominance of the large-scale production does not permit to secure a sufficiently steady social and economic development of the region because there is still a strong dependence on conditions in foreign markets. We see the way out of this situation in diversification of the industrial production and this is connected mainly with import substitution. Currently, there is a program of changing the region’s industrial production structure. Under this program investment projects are being implemented, the most significant of them being in the metallurgical industry.
    One example. Up to 2.5 million tons of ferrous scrap metal are shipped annually outside Kazakhstan. But we also can reprocess such valuable raw materials ourselves. This task has been practically accomplished. At present, adjustment and alignment are underway at Casting. It is planned to produce soon 10,000 tons of steel bars and by the yearend to reach the designed capacity of the first phase amounting to 110,000 tons of steel bars and rolled stock. The project has been implemented in the shortest possible time. The works are being done on arranging steel continuous casting at Litmashkomplekt. So as to carry out the project the Bank of Kazakhstan’s development is opening a credit line to provide $7 million. The total annual capacity of these enterprises between 2003 and 2004 will reach 730,000 tons of steel castings and rolled stock.
Significant investments are directed to reconstruction and technical re-equipment at the Aksu Ferroalloys Plant as well as to Aluminium of Kazakhstan. In the first half of this year capital investments at the Aksu Ferroalloys Plant amounted to $7.5 million. Investments went to repairing furnace 63, reconstructing the dry gas cleaning system and constructing an electrode production shop. In the second half of 2002 alone $8.8 million will be used at the Aluminium of Kazakhstan.

Aksu Ferroalloy Plant

    The Aksu Ferroalloys Plant incorporated in TNC Kazchrome is the world’s largest producer of silicon, chrome and manganese alloys. The capacity of furnaces permits to produce up to 1 million tons of ferroalloys a year. At present, the mill is producing ferrosilicon (145,000 tons a year), ferrochrome silicone (51,000 tons a year), ferromanganese silicon (139,000 tons a year) and ferromanganese. Its products are exported to countries of Europe, Asia and America. Over 450 enterprises of the CIS are the mill’s clients.
Putting electric furnace 63 in operation will complete the program of production diversification. From the start of the furnace operation till its complete shutdown for overhauling up to 54,000 tons of ferrosilicon a year was produced there. Its reconstruction was done because of changed conditions in the world market of ferroalloys and significant growth of demand for chrome alloys. Ten years later the furnace is back in operation being one of the most powerful furnaces in the world. The volume of production will exceed 80,000 tons of ferrochrome a year.
One of the most impressive projects of TNC Kazchrome is to set up production of stainless steel with an annual capacity of over 50,000 tons. The implementation of this project will allow to satisfy the demand of the domestic market for sheet and pipe rolled stock made of special steels as well as to start export shipments. The availability of material resources (scrap metal, ferroalloys), auxiliary materials (bauxite, limestone, metallic pellets) as well as cheap electric power will secure the efficiency of future production.
Consumers of Kazakh alumina are mainly Russian enterprises, above all, Russian Aluminum and SUAL-Holding. But sales of alumina by Aluminium of Kazakstan in the Russian market are not exactly promising because Russian consumers have their own raw material base. Increasing export shipments to Russia is possible only on condition that prices for Kazakh products will be significantly reduced. In terms of selling Kazakh alumnia the most attractive customer is China, where there is a growth of making aluminum products and, accordingly, of alumina consumption, although the country’s raw material base is not sufficient.
The concept of developing the metallurgy provides for new projects in the aluminum sector, particularly, construction of an electrolysis mill to produce metallic aluminum, aluminum rolled stock and construction structures. The designed capacity of this mill is 240,000 tons of primary aluminum a year. Putting the mill in operation will lead to the increased consumption of electric power, coal and products of the petrochemical industry.
The situation in the machine building industry is more complicated due to the significant reduction of making tractors. The reason for this is the absence of Russian shipments of transmissions for tractors made by Kazakhstantractor JSC. Now the region is doing all it can to assist in providing the company with credits for setting up its own production of transmissions. Studies of possibilities to make various agricultural machines and equipment at the tractor plant are being conducted.
We continue to support the process of integrating with neighboring Russian regions. The Pavlodar and Omsk regions are taking measures to develop their cooperation. They signed a protocol of intent that foresees establishing a joint enterprise to make loading equipment and sell it in the West Siberian region. The participants of the projects are the Pavlodar mashzavod JSC and the Omsk transport machine-building plant.
We are seeking to perfect the industrial structure for increasing the share of machine building and other industries, which make end products, as well as to develop import substitution. We think that one of the conditions to achieve our goals is the establishment of partnership relations between the state and business as well as economic integration with Russia’s bordering regions.