ERG subsidiary is cutting its production

According to the Eurasian Resources Group (ERG), its subsidiary the Sokolov-Sarybai Mining Production Association (SSGPO) produced five million tons of iron ore concentrate and steel pellets over the first six months of this year. In 2022, the company produced 6.2 million tons of the product over the same period.

«Due to the current geopolitical situation, ERG has stopped shipping products produced by the SSGPO to the Magnitogorsk Iron and Steel Works (MMK), which used to be the company’s largest consumer before Western countries introduced sanctions on Russia. As a result, the SSGPO was forced to cut its production. However, as the company managed to switch to other consumers, it produced about 5 million tons of product over the first six months this year,» ERG told the Kursiv edition.

Even though SSGPO has resumed supplies to some Russian enterprises, including the Chelyabinsk Metallurgical Plant and the West-Siberian Metallurgical Plant, the total amount of its supply to Russia has been reduced by 500,000 tons.

«As for Ural Steel, we not only resumed our supplies but also started shipping new products like low-sulfur concentrate and fluxed pellets. Over the first six months of 2023, we sent about 1.5 million tons of products. Over the same period last year, we sent more than two million tons to Russia,» the company noted.

SSGPO even sent 50 kg of high-grade pellets with a 65% concentration of iron to Europe. European partners have already reviewed this material and issued a certificate confirming the high quality of the product. The company now wants to launch routine exports of pellets to Europe.

In addition, SSGPO managed to beef up its exports to China. This previously wasn’t that easy due to capacity limitations at the border crossing. Currently, this border crossing is equipped with a dumper machine, which has increased this direction’s capacity by 30%. As a result, SSGPO beefed up its supplies to consumers in China to 2.6 million tons, a 500,000-ton increase over last year.

SSGPO is part of ERG. It runs Sokolov, Sarybai, Kachar, Kurzhunkul and Alekseev pits and the Sokolovskaya mine. SSGPO supplies its key products – iron ore concentrate and pellets – to consumers both in Kazakhstan and abroad (Russia and China).

The Eurasian Group LLP, which is also part of ERG (registered in Luxembourg), is planning to start exporting of hot briquetted iron from Kazakhstan to China in 2026, according to Bloomberg, citing Serik Shakhazhanov, head of the company.

According to Shakhazhanov, the Eurasian Group has already signed an offtake contract with the Chinese. This project is going to cost about $1 billion.

Once the project is implemented, EGR will compete with the Russian Metalloinvest by 69-year-old mogul Alisher Usmanov with a fortune of $14.4 billion, which also redirected its exports from Europe to China due to Western sanctions.

A new hot briquetted iron plant with an initial capacity of two million tons (its full capacity will be four million tons) is expected to start operation in 2026, the Eurasian Group head said.

This product is more complicated than traditional pellets and iron ore concentrate (iron ore), which ERG shipped mainly to the Russian MMK, the owner of which Viktor Rashnikov was included in the sanction list by the EU (March 2022) and the U.S. (August 2022). MMK and SSGPO were long-time partners, as the Kazakhstani company accounted for 70% of all iron ore MMK consumed each year (about 11 to 12 million tons per year).

According to Shakhazhanov, SGPO has already started production of high-quality BF-grade pellets for consumers in Europe. Moreover, the company is planning the production of DR-grade pellets.

He noted that SSGPO wants to boost the production of pellets from 9.8 million tons in 2022 to 11 million tons this year, although the company produced 16 million tons per year before anti-Russian sanctions. The company is currently exporting its products to ArcelorMittal Temirtau (part of Arcelor Mittal, owned by 72-year-old Lakshmi Mittal, No. 93 in the Forbes list of the richest people in the world with a fortune of $17.7 billion) and all the Russian and Chinese companies that are not on the sanction list.

Among the beneficiaries of ERG are the Ministry of Finance of Kazakhstan (40%), Alexander Mashkevich and the Ibragimov family (20.7% each) and Patokh Chodiev (18.6%). In 2005, Mashkevich, Chodiev and now-deceased Alijan Ibragimov became the first billionaires in Kazakhstan with a fortune of $1 billion each. Later, Mashkevich and Chodiev dropped their Kazakhstani citizenship and have become Israeli and Belgium citizens, respectively. Chairman of the Board of Directors and a major shareholder of ERG Alexander Mashkevich is one of the wealthiest persons in Israel with a fortune of $3.7 billion.