In a move which sends a warning signal to Russian industrialists, the U.K.-based Trans World Group has started construction of a $720 million aluminum smelter in Pavlodar. Upon its completion in four years’ time the plant will have the capacity to produce 200,000 tons of aluminum a year, with a sales value of $300 million. (Finansovie izvestia, July 3) The output will be oriented to the Chinese market, and represents what one Russian paper calls "serious competition" for Russian smelters in Krasnoyarsk and Novokuznetsk. TWG will also spend $140 million to expand Pavlodar’s aluminum ore processing plant.
TWM has held a controlling interest in three Russian aluminum smelters since 1992, and buys about one quarter of Russia’s 2.8 million ton annual output. However, TWM lost control over the Krasnoyarsk plant last year, and was embroiled in controversy this spring when Interior Minister Anatoly Kulikov accused the company of having ties to organized crime. Hence TWM’s decision to start shifting its focus from Russia to Kazakhstan. Russia’s plants are in urgent need of new technology if they are to remain competitive with producers in Venezuela and elsewhere, but such investment will not be forthcoming given the political feuds surrounding Russia’s aluminum industry and consequent lack of clear property rights. Another factor making Russia less attractive for metal investors is the fact that in 1996 domestic energy prices reached (and even exceeded) world levels. Nevertheless, a new plant is being built at Dmitrov, near Moscow, to produce 2.5 billion aluminum cans a year, and the US firm Reynolds is involved in a project to produce foil at the Sayansk plant for export to China.
Ukraine also has an interest in the aluminum industry. Its Nikolaevo plant, using imported bauxite, was a major supplier of ore to the Russian smelters. However, at $210 a ton the Nikolaev ore was more expensive than Australian ore, which is available at $155 a ton (transport included). In the past the Russian firms were effectively subsidizing the Ukrainian plant thanks to their own low electricity prices. They will no longer afford to do this, and the future of the 4,000 worker Nikolaevo plant looks bleak.
Three Countries Launch Major Regional Project.