July 4, 2011 / 3:47 PM / 7 years ago

ArcelorMittal sees Kazakh unit buoyed by CIS demand

ASTANA (Reuters) - ArcelorMittal, the world’s No. 1 steelmaker, said it would invest up to $450 million a year in its operations in Kazakhstan until 2015-16 as it expects other ex-Soviet states to raise demand for the metal.

ArcelorMittal owns a steel plant in the central Kazakh city of Temirtau, once one of the Soviet Union’s largest steel producers. The plant, surrounded by coal and iron ore reserves, has annual capacity to produce 6 million tonnes of crude steel.

“Our investments in Kazakhstan in general stand at around $400 million to $450 million a year,” ArcelorMittal Temirtau CEO Frank Pannier told Reuters in an interview on Monday, referring to the period until 2015-16.

Crude steel output at Temirtau could fall to approximately 3.8 million tonnes this year from the originally targeted 4.0 million tonnes, he said, largely due to sluggish demand in the first quarter and a lack of transportation capacities in June.

Temirtau produced 3.3 million tonnes of crude steel in 2010.

“Over 50 percent (of Kazakh steel) goes to CIS markets -- Kazakhstan, Russia, Uzbekistan, Azerbaijan and so on. Around 35 percent is Iran, and the ‘far abroad’ accounts for the rest,” he said, while supplies to giant neighbour China are “almost nil.”

“We see pretty strong growth in consumption in the regions where we sell our output. We see our sales to the CIS grow year by year,” Pannier said. “We see here annual growth at the level of around 12-14 percent.”

NEW PLANT, MUCH LARGER VOLUMES

“We hope that market conditions will be favourable, and by 2015 we will be able to achieve the level of 6 million tonnes,” Pannier said.

“If then it turns out that there is extra demand for larger volumes, and we are able to find new sources of raw materials in the country, then it is quite possible that shareholders will take a decision to build a new plant.”

When the financial crisis sapped global demand for steel, ArcelorMittal put on hold its plans of building a new plant in Kazakhstan with an annual capacity of 4 million tonnes of steel.

This plant, combined with Temirtau being modernised to reach its installed capacity of 6 million tonnes, would have brought ArcelorMittal’s total Kazakh steel output to 10 million tonnes.

“We had already coordinated plans on expanding output to 10 million tonnes of steel, and then in literally two weeks ... the global financial crisis broke out,” Pannier said.

He said ArcelorMittal might still revive its plan of building this 4-million-tonne plant after 2015, adding this would hinge on the growth in demand for steel.

“The United States and Europe still feel the consequences of this crisis,” Pannier said. “Significant changes on the market can be expected only after 2013-14.”

Sales to Iran, at the same time, are likely to remain hostage to the changing political situation. “For instance, sanctions on the part of the United Nations are possible. I hope today that no such problems will arise with Iran,” Pannier said.

“But even if events take such a turn, I believe we will find a market for Iran’s volumes -- there was always demand for Temirtau’s metal across the globe. Kazakhstan once used to sell its metal output to 96 various countries.”

Writing by Dmitry Solovyov; editing by James Jukwey

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