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Iron arguments

Yuri Makarov: "The Far East is a promising market for the development of ferrous metallurgy"

Iron arguments

General Director of LLC Petropavlovsk - Ferrous Metallurgy Yuri Makarov - on the anniversary of metallurgists in the Far East and why the most large-scale and successful projects are moving forward in the most difficult times of crisis.

- Yuri Vitalievich, for the company you are heading, it's a jubilee year - 10 years - as you started a fundamentally new topic for the Far East, ferrous metallurgy. And to decorate the anniversary should launch a new enterprise - Kimkano-Suntar GOK in the Jewish Autonomous Region. Is everything on schedule?

- By June, as planned 5 years ago, probably, we will not be in time. But by October-November this year should be launched. There were certain difficulties in September last year - after all, we are working with Chinese investors, and the Chinese bank gave us a loan for the construction of a part of the plant on the condition that 60% of these funds should remain in the PRC in the form of equipment, equipment and labor remuneration used by us. In fact, the bank imposed us a contractor who buys equipment. And this contractor with his duties coped badly. Because of what the terms were running and a polite conversation was published in September last year, when the first persons from their side and the governor of the region were connected to the solution of the problem with ours. It was unpleasant that in this situation, the Chinese side persistently refused to recognize the flaws, on the contrary, pointed to the right to refuse payment of sanctions for the delay in construction. However, the disputable issues were resolved. At the moment we are working hard to complete the construction as soon as possible.

- This is your second construction in the region, the first was Olekminsky mine. Was it easier or more difficult?

- Now you have to do everything a little longer, more expensive and more difficult. The Kuranakh project got into a very interesting time. In 2001, Petropavlovsk, which until then was engaged only in gold mining, acquired a license to develop the Kuranakh iron ore deposit. While we were conducting geological exploration, preparing documentation, all the peaks in the price of iron ore passed us by. But on the other hand, we fully enjoyed the moment of the 2008 crisis, when prices were falling and suppliers were becoming much more accommodating. Suppose we came to Caterpillar in 2007 and said, "We need 20 trucks." Okay, they would tell us, go get in line and wait. And in 2008, after August-September, life began to improve. One of the lessons that we learned then was that capital construction is most effective during a crisis, especially when you have cash (I won't say that it was very easy to collect it, but we still had it). The metal that we ordered for the construction of a mining and processing plant was much cheaper in 2009 than it was originally estimated. Cement too. The crisis! And this is a significant part of capex, which will then be reflected in the cost of production. And when you manage to make your future life in some way easier, it's great. The main thing in our business is to “catch the wave”: we constantly have to invent something in order to turn even the crisis to our advantage.

- Products of Petropavlovsk - Ferrous metallurgy plants will be exported only? Or will part of the supply be in demand in Russia?

- Today, according to iron ore, our company expects 100% export. Before the Russian consumers, we do not physically transport our iron ore, taking into account transport costs, this is unrealistic and too costly. You correctly noted that ferrous metallurgy is a fundamentally new topic for the Far East. It was never developed - it did not make much sense. From the time of Peter the Great, everything in the European part of the country was all that was needed for the iron and steel industry - coal, ore, blast furnaces, and what is called "infrastructure". All this was usually located close to each other, so as not to be wasted on freight. For what used to be the Soviet Union, and now it would be enough for the iron ore base, mastered in the 50-60-ies. The last century (Kursk magnetic anomaly, Krivoy Rog reserves, Kazakhstan, the Urals, etc.). For one hundred and fifty years the country was exactly provided with these reserves, there was also no crazy market growth, so the fields that Petropavlovsk-Chernaya Metallurgiya is now engaged in at the fate's fate are not very interesting during the Soviet times. I have documents dated 1960-70 for years, in which the Academy of Sciences and Gosplan are in correspondence about the possibility of developing the iron and steel industry in the Far East. But beyond the plans it did not go down.

And then at the end of the 1980s, the market began to change dramatically. In a mysterious “black box” called China, some global processes have begun. Our neighbor began to intensively increase the consumption of everything. Literally. Gradually, without noise and without attracting attention to this, the Chinese became the main consumers of iron ore. In my eyes in 2009, there was a tectonic shift in fact - the suppliers of iron ore stopped discussing the price for it with the Japanese (from which the whole world had proceeded) and began to negotiate with the Chinese. The system, of course, was transformed after a few years - there were so-called spot prices, which have no relation to annual prices at all - but still this example clearly shows that China is the main consumer.

The greatness of my colleagues, the founders of Petropavlovsk, lies in the fact that they noticed this opportunity in time. Accordingly, the market and the technological chains in which we fit in are first and foremost China, as well as the vast market of the countries of Southeast Asia, which is also developing quite intensively now. We are working now with China, with Japan, and with Korea.

But small local consumers are interested in the products of the GOKK being built now. And not metallurgists. We discuss small volumes with the Teploozersky cement plant in the EAO and the coal company SUEK.

For other products, we are also working on options for cooperation with Russian companies. We supply several lots in VSMPO-Avisma. This company, located in the Urals, is the only manufacturer of aircraft parts, working with Sukh, MiG, Airbus, Boeing and other world-class companies.

- You have already mentioned that infrastructure is important for metallurgical enterprises. The Far East is not the most developed region in terms of infrastructure, and it has to compete with countries from Australia to Brazil, which by sea transport their products to the APR. It would seem that Russia has an advantage in the form of a border with China, however, there are not so many year-round operating checkpoints between countries. In this light, one of the expected projects is the construction of a bridge across the Amur to the Jewish Autonomous Region. How important is this project, how can its appearance affect the activities of your enterprises?

- The transport component in the cost of iron ore products is really very high. Moreover, it is almost impossible to accurately calculate the cost of transportation, especially with long-term planning. Even in their own country. For example, how could we predict five years before the launch of our enterprise that one day in our country by many years the existing tariff for transportation, which included everything, would add a new component - the lease of cars? Coupled with the average growth of the actual tariff at 18% per year, our costs of transporting tons of products from 2005 to 2010 per year increased from $ 15 per ton to $ 45. To be fair, I’ll say that later, due to the decrease in traffic volumes during the crisis, the market component of transportation costs - the actual rent of cars - decreased and the total price of delivery of tons became $ 37-39, but it is still more than twice as expensive as initial project evaluation. Transportation of a million tons of ore costs us no longer $ 15 million, but 37-45 million per year.

That is, we, like any producers, are interested in reducing the transport component of the cost price by reducing the transportation shoulder. Therefore, we actively contributed to the construction of a railway bridge in Nizhneleninsky. It is not only our company that is interested in it, but also other Far Eastern producers and the region as a whole. The distance between the nearest trans-border transitions of Zabaikalsk in the Trans-Baikal Territory and Grodekovo-in Primorskii exceeds three thousand kilometers. The opening of a new transition will help to increase the competitiveness of the products of the Far Eastern industry, expand the trade and economic economic turnover between Russia and the Asia-Pacific region. Metallurgical products will be less than half of the bridge's load: oil products, light and food products, building materials and much more will be transported in both directions.

- Working with foreign markets and investments imposes some additional obligations? Does it require specific procedures?

- There is a whole package of strict requirements that we must meet. We have to prepare hundreds of volumes of various documentation, describe all our resources, submit business plans, undergo an audit ... This is a rather complicated and long process, but we have experienced, seasoned fighters here. It is necessary to comply with international standards, which means that it will be so. Even if it is not yet required in Russia. For example, foreign environmental standards include a much wider range of parameters than Russian ones. And we fit into them.

Not only in production, but also in our own office, we use paper produced without chlorine bleaching and certified by the Forest Stewardship Council, we collect used batteries in special containers, and then we export them to the only plant in the Moscow region, where nickel is extracted from these batteries , manganese, zinc, lithium, cadmium and other metals, which absolutely no reason to get into the natural environment.

I can not quote our report. We reduced the consumption of fresh paper by 6,4% compared to 2012 a year - by about 37 a kilogram, which saved 0,37 of large-cube timber cube, 7 of pure water cubes, 37 kW of electricity. Assembled 288 household batteries of various types, weighing 6 kg and 47 batteries from uninterruptible power supplies weighing 151 kg! And, by the way, they checked that the plant to which we send all this for recycling really exists and works, and not just throws it to a landfill. What, too, is never superfluous to check ...

- It seems to me, or is skepticism heard in your words?

- Rather healthy irony (laughs) about the amount of funds that we spend on the proof of our friendliness to nature. Here we take, for example, the Garinskoe field. We only collect funds for the construction of the mine. But by the present moment they have already spent fifteen rubles on the environmental monitoring of this area. To ensure that the air, water, soil, animal and plant world after the start-up of the enterprise remain there the same as before our arrival. There lives a beast - musk deer, listed in the Red Book. For hundreds of years she went on the same route - in the winter to China, in the summer back to us. So, if across the path, along which she and her ancestors walked, pour two meters high, the musk-deer will not guess to climb it to go further .. So it will stand in thought. And die out in the end. So scientists have explained to us that they are studying this musk deer. So, we had to lay down the construction of the cattle-driving areas, which are located at the intersection points of the migration of our Red-book musk deer and the highway, into the project of our highway. This, of course, will make the project more expensive. But the investor can be calm - he will not be blamed and not fined for the destruction of a rare species of animals.

For us, this is still all new, and it seems that everything - and the musk deer, and paper, and batteries - is done only because of the requirements of Western partners. Although in reality there are things that create an enterprise reputation, and we understand this perfectly. And now we are even proud that they have introduced an environmental management system in accordance with the ISO-14001 standard in blood, sweat and tears. Few of our competitors for investments can boast of this.

- The reputation of the enterprise is complicated and multilevel. It is necessary to gain trust and authority not only from investors or Moscow departments, but also from regional authorities, and from people who work at your enterprises and live in towns for whom these new industries are the main breadwinners. How are your relationships with governors developing and what do you give to the regions where your enterprises operate?

- We have no problems with the regional authorities, the relationship is excellent. The Governor of the Amur Region, Oleg Kozhemyako, is a reasonable person who came to power from business, and he perfectly understands how to develop his territory. Alexander Vinnikov, Governor of the Jewish Autonomous Region, absolutely adequately perceives the realities in which his region is located, and successfully works in them. Despite the fact that they have much less opportunities and funds than, for example, their Kaluga or other "central black earth" counterpart. And it is much more difficult to drag investors here than to enterprises a hundred kilometers from Moscow. Therefore, the authorities of the Jewish Autonomous Region, through all their interstate, intermunicipal and other channels, are trying to influence, in particular, the huge and clumsy Chinese office, which is disrupting our construction deadlines. Or help in solving other issues. The future return for them is quite understandable - for example, from the moment the Kimkano-Suntarsky GOK is launched, budgets of all levels will receive about 1 billion rubles in taxes per year. The region will significantly reduce subsidies. Actually, the compressor station of the GOK is still under construction, and for 2012-13. we have paid over 300 million in taxes.

- The state system and legislation regulating the sphere of subsoil use, are built quite difficult and sometimes contradictory. Currently, laws that relate to public-private partnerships, licensing, taxation, etc., are undergoing a major revision. Do you somehow participate in this process?

- Of course. We are invited from time to time to hearings and consultations, we put some questions ourselves. One of the founders of our company, Pavel Alekseevich Maslovsky, currently holds the post of senator from the Amur Region in the Federation Council. His rich experience in creating subsoil user enterprises in the Far East proved to be extremely in demand. Now to the Far East, special attention. And if there is a desire to develop it, it is necessary to create special "rules of life" for it - tax incentives, investments. And not in specific projects, but entirely in the territory. In the creation of not just enterprises, but the conditions for business development. For the Far Eastern Territories this can play a really great role. Steps in this direction have already been made: amendments to the Tax Code have been made, creation of territories for advanced development has been started, and work is also under way in other areas.

- One of the main problems in the Far East is the lack of population, personnel shortage. How do you find qualified personnel for your enterprises and how can you retain these people?

- Our enterprises are "village-forming", and in this case it is possible not to explain what we mean by "social responsibility of business". And we have a creepy staff deficit. In total, during their work, the enterprises of Petropavlovsk, both gold mining companies and ferrous metallurgy enterprises, created about 16 thousand jobs. They require high qualifications. We can not "bring guest workers": to work with complex equipment is not to sweep the streets. Therefore, we try to raise the footage on the spot.

One of the directions is our own production and training base. In the city of Zeya, we opened the Pokrovsky Mining College. We are very proud of this. This is a private educational institution, where we are taught under our specialties and under programs of secondary vocational education. There are plans to open an applied baccalaureate on the basis of the college. While there is no higher educational institution, we send our graduate students to good profile universities. Recently, one such scholarship student, returned after her studies in Irkutsk to an enriching engineer and her groom brought with her. We also took him to work.

In general, where possible, we try to get away from the rotational method, we build a full-fledged normal housing for specialists. In the village of Izvestkovy, the nearest settlement to Kimkano-Sutarsky GOK, a house is being built on 48 service apartments, next to it, according to the general plan, a site was laid out on 4 such houses, and around 15 acres were cut. I suppose that some of the employees who will come will prefer the plot and house to the apartment. We will help, including some kind of credit resources. Its water, heat, electricity is already there. We'll see. These are very far-reaching plans. But feasible. 

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