International "Astana Mining & Metallurgy" Congress
18-19 June 2020
Nur-Sultan, Kazakhstan

Kazakhstan’s mining and metallurgy industries hold market positions in 2018 despite losses in global produce value

Second in importance next to combustibles (oil, gas, coal, uranium), Kazakhstan’s metal mining sector has by and large come unscathed through the global metal slump which marked the year 2018. Losses in (hard) cash have been considerable, but Kazakhstan’s miners have managed to preserve their market positions.

Kazakhstan’s mining industry through the year 2018 accounted for just over 15.2 trillion Kazakh tenge, or in the order of some 4 billion US dollar based on average exchange rates in the year, set against a total industry valuation (excluding oil and gas) of slightly more than 27.576 trillion tenge, according to data recently released by the National Statistics Agency. Ore mining was valued at KZT1.462139 trillion, including KZT290.47 billion worth in iron ore and KZT1.171669 trillion in non-ferrous metal ore - excluding precious metals which are not included in statistics reports. On-year increases in the three categories stood at 4.7, 6.5 and 4.3 per cent respectively.

Midstream, crude steel production in 2018 came close to 4 million tonne and that of flat rolled steel close to 2.55 million tonne, down 14.7 and 10.5 per cent on-year respectively. In nominal local cash value, midstream metallurgy stood close to 4.656 trillion Kazakh tenge, up 2.2 year-on-year, including ferrous metals worth KZT1.7463 trillion (down 1.7% on-year) and close to KZT2.9 trillion in non-ferrous metal processing.

The striking contrast in increases in nominal cash value in Kazakhstan’s mining and metallurgy sector and trends in international benchmark prices of Kazakhstan’s metallic output can be explained by the fact that the national currency lost in the order of 14 per cent through 2018 against hard currencies. Through the year 2018, most non-ferrous base metals lost more than half of the gains they had posted in the previous year (see tables on top), while iron sank even further, though less sharply, from its previous year losses. Except palladium (due to high hopes on electric car industries), precious metals ended the year in the red as well.

Trends towards the end of last year promised little improvement for the current year. “The base metal price index declined by 1.3% in December m-o-m. It declined by 14.6% in the second half of 2018,” the latest OPEC review, which includes a chapter on non-hydrocarbon commodities, reads. “Prices continued to be pressured by the deepening slowdown in global manufacturing. The JPM Global Manufacturing Purchasers Managers’ Index was at a 27-month low of 51.5 in December. In China, however, both manufacturing surveys by the NBS and Markit showed readings below 50.0, signalling a contraction in December activity in the main consumption centre.”

“On the back of worsening conditions for the manufacturing sector, and amid turmoil in financial markets, copper prices declined by 1.9% during the month. However, the low inventory levels at the London Metal Exchange (LME) – designated warehouses – around 132,000 mt vs 136,000 mt the previous month – prevented further price drop. Furthermore, the International Copper Study group estimated the global refined copper balance to be a 595,000 tonne deficit the first nine month of 2018, which suggests a tighter market.”

“Meanwhile, aluminium prices declined by 0.9%, mainly in connection with the lifting of sanctions on Russian producer Rusal, while at the same time, worries about the slowdown in China also played part. Amid increasing aluminium output in China in 2018 - by around 1.4% according to the International Aluminium Institute - in the January-November period, and the aforementioned sanctions on Rusal, China’s aluminium exports rose by 20.9%, according to the last trade data. Large deliveries of aluminium to LME warehouses were registered during the month – leaving stocks at 1,271,200 mt vs 1,052,450 mt the previous month.”

In terms of trade metal ores and their half-fabricates only accounted for 14 per cent of Kazakhstan’s export (expressed in US dollar) in 2018. In terms of employment, mining also scores low with just 198,000 jobs as of October 1 last year, on a total of 6.612 million in the country. Salaries in mining and metallurgy, though, are among the highest in Kazakhstan (together with the financial sector) and stood at 372,180 tenge on average in 2018, up 12.6% nominally and 6.3% in purchasing power. By comparison, wages in Kazakhstan’s construction sector last year averaged 229,185 tenge and those in the manufacturing sector at KZT 183,106.

By Charles van der Leeuw for Newsline, based on data from the Kazakh national statistics agency, OPEC.

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