Transcript of the beginning of the meeting:
Dmitry Medvedev: Mr Yurevich, can you see the sign congratulating us on Metallurgist Day? I would also like to congratulate you and all regional residents, as well as all Russian citizens working in the metallurgical sector. We have just visited a new facility as part of the current event. I am talking about the plant and the integrated works. We have inspected a new rail and structural mill. This modern high-tech production facility makes it possible to manufacture 100-metre long rails and modern beams. But this is not being done for the sake of production alone but in order to ensure the industry’s development, to create new, modern and cost-effective jobs in the metallurgical sector, including the Chelyabinsk Integrated Iron and Steel Works and, of course, other companies and enterprises. This is an example of positive and serious investment activity because almost 30 billion roubles have been invested in production expansion projects as a result. Naturally, this is a great achievement in the context of re-equipping the entire integrated works. I hope that this is not the only example for the Chelyabinsk Region. What is the situation like with new production facilities, investment projects and jobs?
Mikhail Yurevich: Mr Medvedev, over the past five years, we have modernised 80% of the metallurgical production facilities in the Chelyabinsk Region. But due to the market situation major investment projects have come to an end. This includes the Mill 2000 and Mill 5000 projects at the Magnitogorsk Integrated Iron and Steel Works, as well as the Vysota (Height)-239 large diametre pipe production facility at the Chelyabinsk Pipe Rolling Plant, and, finally, a rail and structural mill at the Mechel mining and metallurgical company. Although this is the future of the metallurgical industry, we are currently implementing about 100 other investment projects, and I will only list the most ambitious ones. The Mikheyevsky Ore Mining and Processing Integrated Works in the Varnensky District of the Chelyabinsk Region, which is scheduled to open in September, will manufacture 65,000 tonnes of copper a year. This year we are launching construction of the Tominsky Ore Mining and Processing Integrated Works. The local deposit contains about 30 million tonnes of ore and the new company will manufacture over 100,000 tonnes of copper. We are currently drafting project design documentation for the Nyazepetrovsky Ore Mining and Processing Integrated Works together with the Ministry of Regional Development. Japanese experts have developed a new and unconventional pig-iron production process, which uses a boiling coal layer rather than blast furnaces. The ore is instantly converted into pig iron inside this boiling coal layer, which contains ordinary and non-coking, free-burning coal. Such facilities are already in operation in the United States.
Dmitry Medvedev: To the best of my knowledge, these facilities, including large facilities, are currently being created.
Mikhail Yurevich: Yes, these are large facilities which are receiving investment of about $1 billion and more.
We are also building three regional electric power stations, which cost over 20 billion or about 40 billion. The Troitskaya state district electric power station is currently under construction. The new 600 mWt power unit uses coal, and initially we plan to build two such power units. We are building two power units with a capacity of 420 mWt each at the Yuzhnouralskaya thermal electric power station making a total of 840 mWt. The Finnish company Fortum Oy will finish building three 280 mWt power units in Chelyabinsk next year. They have sent a letter of guarantee concerning two more 280 mWt power units at the No. 5 thermal electric power station in a new residential area in Chelyabinsk. Those are our large-scale projects.
Dmitry Medvedev: I would like to say once again that the projects are being implemented not just for retooling and modernising production but to create jobs, with decent salaries. As far as I understand, these companies fit into this category.
Mikhail Yurevich: Of course, Mr Medvedev. Their labour productivity will be very high so their workers will receive much higher salaries, probably about 50-100% above the regional average.
Dmitry Medvedev: And what is the average regional salary currently?
Mikhail Yurevich: The average regional salary is about 24,000 roubles. But we have now started freezing salaries because of a slightly difficult situation in many sectors, including engineering and metallurgy. We are facing a sales crisis and an absence of niches in the global market.
Dmitry Medvedev: Yes, that’s right. Unfortunately, there are no global market niches. By the way, we will discuss this issue at a meeting on metallurgy because we have to understand how we can support metallurgists even in the face of a declining market such as currently exists in this sector. It is good that you are developing in this direction … Are there any other similar projects?
Mikhail Yurevich: We also have some gold deposits in the southern Urals region. Last year, we mined about 6 tonnes of gold, and in two years' time we are set to expand gold production to 15 tonnes per year. When developing a gold deposit, the heap leaching method is used first, and then later a gold extraction factory is built. Our gold deposits are located near roads, electric power stations and gas supply facilities so the gold content can be very low, up to one gramme per tonne, which is quite profitable at the current price of gold. We have also launched construction of another major gold extraction factory in the city. This new company will process 8 million tonnes in waste, producing about 8 tonnes of gold a year.
Dmitry Medvedev: Are these projects you talk of bringing extra money into the regional budget? As I understand it, that is the main purpose of establishing these production facilities.
Mikhail Yurevich: Yes, Mr Medvedev. We are focusing on copper and gold production because the global market situation for these two metals is quite favourable. For all other metals, it's not looking so good, including zero demand for zinc and zero, or even negative, demand for steel.
Dmitry Medvedev: Let’s hope that this situation on the global markets will not last forever, and that there will be a change. Nevertheless, we do expect this to provide additional budget revenues?
Mikhail Yurevich: Yes, that’s right. But the food industry currently provides the bulk of regional budget revenues.