Kazakhstani and Russian moguls are going to compete for Chinese market

ERG, a subsidiary of the Eurasian Group (registered in Luxemburg), is planning to kick off exports of hot briquetted iron (HBI) to China starting from 2026, Serik Shakhazhanov, CEO of the Eurasian Group said.

According to the executive, the company has already signed an offtake contract with the Chinese side. In order to deliver its business obligation on the export, the Eurasian Group invested roughly $1 billion into the project.

ERG isn’t the only metallurgic company from the CIS that want to work with the Chinese. Russian Metalloinvest controlled by 69-year-old Alisher Usmanov (122nd place in the Forbes Billionaires list with a fortune of $14.4 billion) is also trying to expand its presence in China in an attempt to offset its losses in Europe because of anti-Russian sanctions.

A new plant designed to produce HBI is expected to start operations in 2026, Shakhazhanov said. In the first stage, it will produce two million tons of the product per year. After that, its capacity is expected to reach four million tons.

HBI is a more sophisticated product than iron nuggets or iron-ore concentrate which ERG used to send to the Magnitogorsk Metallurgical Plant (MMP) in Russia. In March 2022, Viktor Rashnikov, owner of the plant, was included on the EU sanction list, with the U.S. following suit in August 2022. This caused Sokolov-Sarybai Mining Production Association (SSGPO, a subsidiary of ERG) to cut its production.  MMK needs 11-12 million tons of iron ore raw material a year and SSGPO used to cover about 70% of this demand.

This year, SSGPO has launched the production of high-value pig iron nuggets made from blast furnace (BF) dust. In July, the first export of the product will be sent to Europe. Moreover, the company is planning the production of another high-value product made from direct reduced iron.

SSGPO is going to expand its production of iron nuggets from 9.8 million tons in 2022 to 11 million tons this year, although it used to produce 16 million tons of product a year before Western sanctions against its partner in Russia. Currently, SSGPO is exporting its iron nuggets and other products to China, to those Russian companies that aren’t under sanctions yet and to ArcelorMittal Temirtau, a subsidiary of Arselor Mittal controlled by 72-year-old Lakshmi Mittal, No. 93 in the Forbes Billionaires list with a fortune of $17.7 billion.

As Minister of Industry and Infrastructural Development Marat Karabayev said in June 2022 (while he was vice minister), Kazakhstani officials had foreseen such a decline in production as the cabinet was expecting the production by SSGPO to drop because of the sanctions against MMP.

Among the final beneficiaries of ERG are the Ministry of Finance of Kazakhstan (40%), Alexander Machkevich and the Ibragimov family (20.7% each) and Patokh Chodiev (18.6%). In 2005, Machkevich, Chodiev and Alijan Ibragimov (who died in 2021) became the first billionaires in Kazakhstan with a fortune of $1 billion each. Both Machkevich and Chodiev have changed their nationality. Now they possess citizenship of Israel and Belgium, respectively. With a fortune of $3.7 billion, Machkevich is ranked the sixth richest person in Israel, according to Forbes.