November 18, 2010 / 8:46 PM / in 8 years

Russia to create "Titanium Valley"

VERKHNAYA SALDA, Russia (Reuters) - Russia will create a Titanium Valley economic zone around VSMPO-Avisma(VSMO.RTS), the world’s biggest producer, to tempt in foreign companies, Prime Minister Vladimir Putin said on Thursday.

Russia's Prime Minister Vladimir Putin (R) visits VSMPO-Avisma titanium plant in the town of Verkhnaya Salda in the Urals, November 18, 2010. REUTERS/Alexsey Druginyn/RIA Novosti/Pool

Putin, on a trip to the Ural Mountains home of the company, said he will sign a decree in two weeks to set up the zone, which will include at least 40 billion roubles ($1.29 billion) in investment.

VSMPO-Avisma is little known outside of Russia despite its role as a key supplier to both Boeing and EADS.

It produces 25 percent of the world’s titanium, a high strength metal used in aerospace and defence as well as golf clubs, medical equipment and nuclear energy.

Titanium Valley is part of a bid to accelerate economic growth and create jobs focussed on natural resources, Russia’s main exports.

“It will give enterprises the opportunity to develop and produce value added products and also bring our partners here,” Putin said at VSMPO-Avisma’s core plant in Verkhnaya Salda, about 1,700 km east of the Russian capital.

Russian Technologies head Sergei Chemezov said that aerospace firm Rolls Royce and Goodrich may set up shop in Titanium Valley. The state-owned technology company owns more than 70 percent of VSMPO-Avisma.

The scheme, which hopes to create 20,000 jobs in the town, mirrors Russia’s much-hyped Skolkovo centre, where the Kremlin hopes to foster local technology companies in a hub modelled on California’s Silicon Valley.

A number of industry leaders, including Finland’s Nokia, have already jumped on board.

KEY CUSTOMER BOEING

Putin toured the VSMPO-Avisma plant and praised management for investing in production.

“I have had a look how the enterprise works — it is stable, and lots of money is being invested in modernisation,” Putin said, adding that $700 million would be invested over the next three years.

VSMPO-Avisma, which does not have an international stock market listing, said 70 percent of its aviation titanium is sold to Boeing, and that EADS’s Airbus buys the rest.

The U.S. aerospace firm already has a significant presence in Verkhnaya Salda via the Ural Boeing Manufacturing (UBM) joint venture launched in 2009. Putin also visited that plant.

The state-of-the-art facility manufactures titanium forgings for Boeing’s troubled 787 Dreamliner plane, as well as its 777 and 737 aircraft.

When UBM opened last year, Boeing said it expected to spend up to $27 billion on Russian titanium over the next three decades.

VSMPO-Avisma in August said it expected 2010 revenues to exceed an earlier $976 million target.

It produced 24,400 tonnes of titanium sponge in January-October, up 7 percent from last year.

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