02.06.2017
AMM TRENDS – ROAD MAP OF MMC FOR 2017-2020.

The VIII International Mining and Metallurgical Congress and “Astana Mining & Metallurgy” Exhibition - AMM-2017 took place in Astana

This year 750 delegates from Australia, Austria, Brazil, Great Britain, Germany, Kazakhstan, Canada, Poland, Russia, USA, Ukraine, France, Chile, Czech Republic, Switzerland took part in the Congress; 44 companies from Austria, Germany, China, Kazakhstan, Poland, Norway, Russia, Turkey and Japan presented their expositions at the exhibition.

 

During the session meetings and round tables, key players of the industry presented their vision of the current state and growth opportunities of MMC and identified a number of critical issues of development of the industry. Currently, the industry is experiencing three interdependent crises: the decline in demand in markets (reduction of profits), the need for innovation (survey of capital and investments for modernization), staff scarcity.

 

According to the data provided by Arman Zhubaev, director of consulting firm PwC Kazakhstan, MMC crisis of 2015 ended. Already in 2016, demand was consistently higher than forecasts, raw materials prices began to rise, this trend continued in the current year.

 

However, this is a general trend in the industry, a number of areas are still experiencing the effects of the recession, in some there are new difficulties on the horizon.

 

Many speakers noted the dependence of industry expectations on behavior in the Chinese market. The situation is ambivalent. On the one hand, demand for metals is expected to increase, 50% of which will be for China and India. On the other hand, steelmakers, who forced the industry in conditions of Chinese demand, fell sharply in 2015, when the country intensified its own steel exports.

 

Paramjit Kahlon, CEO of JSC “ArcelorMittal Temirtau”: “The slowdown in the growth of the Chinese economy has led to a decrease in domestic demand for steel products. Chinese steel mills significantly increased its exports. In 2015, the volume of steel exports from China increased by 19.9% ​​and reached 112.42 million tons. Only in September 2015, China exported - 11.25 million tons. This became a real challenge for the global steel industry.”

 

As Thomson Reuters Asia columnist Clyde Russell commented the situation: “What China gives, China can take away.”

 

The Chinese influence on copper prices was also noted by Eldar Mamedov, Chairman of the Board of LLP “KAZ Minerals Management”. According to his opinion, at the end of 2016, expectations improved regarding an increase in demand for copper, which had a positive effect on its price. At the beginning of 2017, supply disruptions supported the price, but this was offset by a weakening of growth of demand from China. Analysts predict a significant market deficit only by 2021, linking it with the widespread increase in the production of electric vehicles and the introduction of environmentally friendly energy production technologies. Despite the fact that forecasts for prices in the long run are encouraging, the forecasts of the producers themselves are concentrated around the problem cases. Bakhtiyar Krykpyshev, General Director of the Management Council of JSC “Kazakhmys Corporation” highlighted the need for new projects with a potential of at least 5 million tons of copper equivalent and a cost effectiveness threshold of new projects above $ 6,500 per ton. The commissioning of new capacities takes 7-10 years, but there are no large projects on the horizon.”

 

The need to introduce innovations was illustrated by the director of the Department of Energy and Mining of the German Energy Agency, Eckehard Bucher: “Production operations around the world today are 28 percent less productive than 10 years ago.” The OECD also criticizes the build-up of capacity, requiring efficiency from new productions.

 

In Kazakhstan there is a significant gap in terms of equipment. Projects for modernization require serious investments and time. As Nikola Popovich, Chairman of the Board of Directors of “Kazzinc Holdings” LLP, emphasized in his report that the company has been engaged in modernization of production for 20 years, but some production processes are still not automated.

 

A serious deterrent on the way to modernization was noted by Nikolay Radostovets, Executive Director of the ALE “Republican Association of Mining and Metallurgical Enterprises”. He proposed to abandon the system of calculating the share of local content (CT-KZ certificates). In the era of globalization and increasing production efficiency through inter-industry and interstate  cooperation, the most innovative products of our time are created/assembled from components from different countries and industries.”

 

So, ACF "PIT" in its plans to implement the program “Industry 4.0”, relies on existing developments of foreign companies, because delaying the launch of new products obviously turns them into uncompetitive ones. Askar Sembin, Deputy Director General of Autonomous Cluster Fund “Park of Innovative Technologies”: “Due to the expected saturation of the market, the prices for powder nomenclature are predicted to decrease in the next 5 years.” Creation of own personnel and technological resources should go in parallel. The company conducts search and selection of innovative projects for the branches of the Republic of Kazakhstan within the framework of “Startup Kazakhstan”, is engaged in attracting venture co-investments in the joint seed fund for “Startup Kazakhstan” and corporate acceleration.

 

The problem of quality personnel was somehow affected by virtually all speakers of the Congress. The most acute shortage is felt in the sphere of geological exploration and new technologies.

 

Isolation of university programs from production needs has led to the fact that many enterprises organized their own faculties and courses to train specialists with the necessary skills and knowledge.

 

The emphasis on a new approach to training specialists was made by Andrei Navitsky, Director of Boston Consulting Group, Moscow. In his report dedicated for market trends and the challenges of the future, he noted that “development of automation of production and the use of digital technologies will further reduce unit costs. Major innovations in the mining industry are aimed at automating current production and increasing labor productivity. The profile of employees will change in the direction of increasing the role of systems thinking and analytics, digital solutions, rather than just knowledge and experience in production.

 

The investment expectations of the industry are related both to current foreign and joint investment projects, and to the World Mining Congress (WMC), which will be held in June next year in the capital city. In his welcome speech to the delegates of the Congress, First Deputy Prime Minister of the Republic of Kazakhstan Askar Mamin noted that “within the framework of the WMC there is planned an investment conference Mines & Money, which will in the future attract more than 300 investors to Kazakhstan.”

 

Many industry participants noted a significant softening of the investment climate. In his speech, Igor Finogenov noted significant changes at the state level in terms of simplifying procedures and access to geological information. “Polymetal” positively assesses the Draft Code “on Subsoil and Subsoil Use”, which provides for a large package of financial and economic instruments to stimulate geological exploration. In anticipation of the new Code, Kent Balas, the leading geologist of Aurora Minerals Group, announced the company's plans to introduce modern technologies and methods to the Kazakhstan market and promised to help mining and exploration companies enter the Kazakhstan market.

 

Abdumalik Mirakhmedov, a general director of ATK Holdings International Trading Company, said: “We are aimed at cooperation not only with large mining corporations but also with small and medium-sized businesses and are ready to open a global export market for local producers of Kazakhstan”.

 

The First Vice Minister for Investment and Development of the Republic of Kazakhstan, Alik Aidarbayev reminded the delegates of the Congress that “the industry, including the mining and metallurgical industry, faces the task of ensuring an annual growth of production volumes by 7%, starting from 2019. In this connection, we hope that industry leaders will adjust their development strategies in line with new challenges in conditions of global competitiveness to ensure the growth of production volumes.”

 

The VIII International Mining and Metallurgical Congress and “Astana Mining & Metallurgy” Exhibition - AMM-2017 was held with a support of the Ministry of Investment and Development, LLP “Eurasian Group”, LLP “Kazzinc Holdings”, JSC “Polymetal UK”, LLP “KAZ Minerals Management”, LLP “Kazakhmys Corporation”, JSC “ArcelorMittal” Temirtau, LLP “Aktobe Copper Company”, ATK Holdings, LLP “Info Soft Prom”, and JSC “Kazakhaltyn MMC”.

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