| As a first question,
before we get to the history of Ispat Karmet in
Kazakhstan, I'd like to know about the evolution
of Kazakhstan's economy and the metallurgical industry
Kazakhstan is a very young country which has
integrated into the market economy within 10 years.
Thanks to President Nazarbayev's committed leadership,
Kazakhstan has made a significant progress till
today. This success is also based on 2 major factors:
natural resources and its people. Kakakhstan has
a large population of 15 million people. A large
percentage of the total population are highly
technically qualified skill workers, especially
in the technical field. Kazakhstan has the highest
GDP growth among its neighboring countries. In
Kazakhstan, the quality of standards of living
and the economic situation are improving. The
employment ratio is also increasing. On the top
of it, foreigners have started to realize that
this country has a great potential thanks to its
highly qualified workers. An increasing number
of investors have started to think on establishing
some intermediate production in Kazakhstan. But
still the number of foreign companies establishing
here is not so high. We decided to invest in Kazakhstan
as we had already experience on working in this
type of environment and threat is not a constraint
for us. Some western and European companies have
not come to Kazakhstan yet because they need to
be sure that everything is 100% correct.
Could you tell us about the investments of
Ispat Karmet? Could you tell us about the historical
background of the company?
The L.N.M group came to Kazakhstan at the end
of 1995. We have completed 7 years in Kazakhstan.
The L.N.M. group has celebrated its 25 years.
It is a very young group and none of the groups
have grown as fast as the L.N.M group. It started
in Indonesia 25 years ago, selling 25 thousand
tons of steel and now they are selling 25 million
tons of steel. Today we are the second largest
steel company in the world. We are the only global
steel company. We operate in 11 countries. Our
success of the last 7 years is also thanks to
the support of the Government of Kazakhstan. Moreover,
the people of Kazakhstan appreciate this company
very much. Regarding the evolution of the company,
when we took over, the plant was producing only
1.9 million tons of steel per year. Today we produce
5 million tons of crude steel and 3.8 million
of saleable steel. During soviet times, the market
was not a concept to care about as everything
was consumed within the Soviet Union. Since the
end of the Soviet Union, the first problem we
had to solve was the opening of markets which
we started to do and today we sell to three big
markets: China, Iran and Russia. The material
from this plant goes to about 64 countries around
the world some as far as American Continent. Since
we took over in 1995, we have invested about $800
million in upgrading the plant. It was an enormous
challenge and one of the major issues we tackled
were environmental concerns while upgrading the
plant. We were willing to bring the plant to World
standards because the World Bank, EBRD have supported
us throughout this time. We are certain that we
have met their requirements on the environmental
reference. The next stage of upgrading the plant
has already started.
There are two angles to this next stage of upgrading.
The first one is that competition in the steel
industry is increasing as there is a surplus of
steel. We have to compete in the international
market and technology has become one of the most
important concerns for us. Fortunately for us,
since we are a multinational company, we do have
technology from all the parts of the world, as
we have plants in many countries like USA, Mexico
and Canada. They have some advantages in technology,
but simultaneously, the ex-Soviet plants are very
strong in metallurgy with skilled workers in this
area. If a father is a metallurgist, then it is
likely that his son will also be a metallurgist,
which is not a case in other parts of the world
today, where young people want to become economists,
get their MBA, go to the banking services. But
in this part of the world, metallurgy is still
a passion for its people. We have one of the largest
metallurgical institutes situated in this place,
which produces approximately 1000 metallurgists
per year. They are all looking forward to work
in this plant to get work experience. For example,
the head of security had previously worked in
the plant. After a few years, he became the head
of the department. What I wanted to highlight
is that our people are very involved in the process
of steel making and normally the work discipline
is very high. Today, our plan is to invest about
$580 million in the next 5 years. We have a very
defined strategy plan, which is to focus on increasing
the quality of the steel rather than on the quantity
of steel produced.
We think it would be very interesting for
our readers to know about the strategy of your
company? Could you tell us in detail about your
Our strategy is to care for our customers. We adopt
our customers' requirements for the manufacturing.
The market demands quality and timely delivery of
what we have to produce. That is why we have to
produce with such a strategy where technology becomes
very important in order to be competitive. That's
one thing. The second one is on the material resource.
Fortunately, Kazakhstan is raw material resources
based economy. The metal resources are very high
in Kazakhstan. We utilize these resources effectively.
We try to create an effective manufacturing as part
of our strategy. What is our strategy for energy
resources? It is a very important part of the steel
making process. Coal is our main energy resource.
We have our own coal mines which produce an output
10-11 million tons of coal per year. Some amount
of this coal is exported. We utilize effectively
the available energy resources in order to make
our steel most competitive. That is one part of
our strategy. The next strategy is upgrading the
technology. During soviet times, technology became
uncompetitive in some areas. Due to market requirement,
we have started to upgrade our technology. Now we
are going through the basic steel technology upgrading
which involves a large investment and our promoter
is willing to invest that kind of money.
| What about the evolution
of your company? Could you tell us some figures
including the destination of your production and
where the output goes?
Today our crude steel production is 5 million
tons and we are likely to produce 3.8 million
tons of finished steel in year 2002. It has doubled
since 1995. It was 1.9 million tons by then, and
nowadays it is 3.8 million tons. We are not making
the long products, basically we produce flat products
as they are very high value added products. The
largest part of our production goes to China.
The second major market is Iran and the third
one is Russia. These three countries together
cover 80 % of our exports.
Do you have any plans to go to other countries?
One of the next large markets is the European
Union. We sell about 100-110 thousand tons per
year there. South East Asia is another market
which we are trying to develop but because of
freight consideration, this is not our natural
What about the relations that you have with
foreign companies within the local market? What
kind of relations do you have with local companies?
We are a big company and we have received financial
assistance from International Financial Corporations
and European Bank of Reconstruction and Development
for the first stage of modernization. What we
are doing now is giving a lot of importance to
small and media enterprises related to steel industry.
It is important to develop local entrepreneurship.
Now we are trying to identify the local small-scale
industrial enterprises. We already identified
about 8-9 companies like that and we are beginning
to work with them. They will be producing products
that they have identified for our plant, and we
will buy those from them. This is another way
to develop and contribute to the country's economic
growth. It would develop many entrepreneurs and
they will be able to manage their activities in
a proper way.
Could you tell us about the importance of
Ispat Karmet in the region?
Today Ispat Karmet currently employs fifty five
thousand people. This is our direct employment,
but we also provide with indirect employment by
utilizing the rail transportation. We provide
nearly 60% of Kazakhstan Temyrzholy loads, which
means that the railway depends 60% on Ispat Karmet.
Fifty five thousand employment posts plus the
indirect employment, means that around 300,000
people depend on Ispat Karmet. Ispat Karmet is
supporting the population of Temirtau with communal
and tramway services. The 110,000 people that
live in Temirtau depend on our plant. The steel
industry is one of the most important industries
for Kazakhstan and it adds about 3% to its GDP
in some form or other.
Recently we have launched a SME resource with
IFC where IK holds 51 % share and IFC owning 49
We know that the Karaganda region gets 30%
of its tax payments from Ispat Karmet. What about
the government support? Is it active?
The steel industry is an old industry. Governments
worldwide, even USA have always supported this
industry. Several years ago President Nazarbayev
was working in this plant. He is a metallurgist
who was educated at Karaganda Institute. Mr. Nazarbayev
supports us which is very important in order to
export steel as domestic market is very very small.
There are so many restrictions in other countries
for import of steel and without your own government
support you cannot do anything because bi-lateral
agreements can be negotiated only at Government-to-Government
What has been your biggest challenge since
1995 until now? Could you tell us about something
that was difficult to achieve?
The biggest challenge has been to develop a market
for this plant. Kazakhstan had no export market
in 1995. That was our biggest challenge during
the last 7 years. Thanks to the synergy with our
group and the support of the government, we succeeded.
The second challenge is the renovation of the
plant and attracting investment into the industry.
Investors normally are not eager to invest their
money here. Fortunately, our performance has been
so good that attracting investments to our industry
has been less difficult than expected.
What is your vision of the plant in the next
In the next five years we would like to be one
of the most globally competitive steel plants
both in terms of cost and quality. There is no
point on adding more and more quantity, but improving
quality by meeting our customer requirements.
We will basically focus on our natural market,
quality requirements and technology.
What is your final message to our readers
from Asia, USA, and Europe keeping in mind that
they are the top executives of companies?
Kazakhstan is an opportunity for the investor. It
has many competitive advantages. I personally feel
that this country has huge opportunities. It is
time for investors to come to look at the potential
of this place and to establish more and more manufacturing
facilities. The government is very supportive here.
The competitive advantage of Kazakhstan is that
you find in the same place committed manpower, abundance
of natural resources and government support. Such
a combination is very difficult to find. There is
a feeling from outside, that CIS countries are not
so good. I have been working in many countries and
I can say that the situation here is much better.
I think that investors should come and see that
Kazakhstan is a secure place.