Kazakh mining companies will be obliged to supply metals to domestic industrial enterprises

Companies extracting copper, aluminium, lead and other metals will have to include in the existing contracts a provision on the need to supply raw materials to Kazakh enterprises in the manufacturing sector. Under the current rules, adopted in May, subsoil users can voluntarily enter into agreements with Kazakh processors for the supply of raw materials. However, the situation regarding the supply of raw materials has not changed, the MIIR states. “In order to level the risks, it is necessary to provide domestic processing enterprises with raw materials … In order to provide manufacturing enterprises with domestic raw materials, obligations are established for producers of domestic raw materials to provide manufacturing enterprises with domestic raw materials; enterprises of the manufacturing industry for the purchase of raw materials and their processing,” the report says. Amendments to the rules are proposed to be approved by a government decree. The Ministry proves the need to prescribe the obligation to supply raw materials to processors using the example of three metals: aluminum, copper and lead. The only local supplier of aluminum is the Kazakhstan Aluminum Smelter, which produces about 260,000 tons of primary aluminium. “Of these, 34 thousand tons (13%) are sent to domestic processing enterprises, while the required volume is about 73 thousand tons,” the document says. The main aluminum processors in the republic are several companies: Aluminum of Kazakhstan, ALYUGAL, Profile metals ltd, Small Metallurgy, Vector Pavlodar, Gold Aluminum, Tsvetlit, Kazenergokabel, Taldykorgankabel and EMZ “. Their loading, taking into account the use of similar imported raw materials, on average does not exceed 38 thousand tons, or 52% of the available capacity. Major copper producers in the republic are: Kazakhmys Corporation, Kazzinc and KAZ Minerals group, which together produce 459 thousand tons of cathode copper. Of these, 5.3 thousand tons (1.2%) are sent to domestic processing enterprises, while industrial enterprises need about 38 thousand tons. The main processors of copper are the following companies: KAZKAT, EMZ, Kazelectromash, ZOTsM, UMP. The load of these enterprises, taking into account the use of similar imported raw materials, on average does not exceed 10 thousand tons, or 26%. The only lead producer is Kazzinc, which produces 108,000 tons of refined lead. Of these, 24 thousand tons (23%) are sent to domestic processing enterprises, while their need is 30 thousand tons. The main deterrent to the low load of existing domestic processing enterprises and the barrier to the emergence of new processors in MIIR is the “lack of metals” or the relatively high price of domestic raw materials within the country. Previously, when purchasing Kazakh raw materials, manufacturing enterprises paid for them at the London Metal Exchange (LME) price, which includes the cost of transportation to the nearest LME warehouses in the Black Sea ports, insurance and an additional premium for each ton of metallurgical raw materials. All this affected the cost of production and, ultimately, the workload of the enterprise. As a result, Kazakhstani producers lost out to foreign producers in the competition. MIIR managed to negotiate with major suppliers of raw materials on its supply to domestic processors according to the formula: aluminum at the LME price minus 5%, copper at the LME price minus 5%, lead at the LME price minus 2%. The document notes that in Kazakhstan the domestic economy remains highly dependent on imports. At the end of 2021, imports of manufactured goods exceeded $38.4 billion. President Kassym-Jomart Tokayev, in his message to the people of Kazakhstan on September 1, 2020, instructed the government to develop mechanisms to ensure the full loading of domestic manufacturing enterprises with raw materials. A year later, the head of state noted that the price of raw materials for domestic industrial enterprises should be affordable, and the volumes should be sufficient.