Chinese metallurgists move to Primorsky Krai

China closes its own capacities due to environmental requirements.
The Ministry of the Russian Federation for the Development of the Far East announced plans to create a cluster for deep steel processing in Primorye. The main investor of the project is "Deban Guangdong" - a Hong Kong company established in 2004 by the state-owned Hebei Luanhe Group. The group is involved in the metallurgical industry, cement production and real estate. The project will be implemented in three stages and involves the construction of 10 million tons of steelmaking capacity. The first stage of the project involves the construction of an industrial base, the capacity of which will be up to 1 million tons of products per year, at this stage it is planned to invest about $ 500 million, according to a report on the ministry's website. Yao Xiaodong, chairman of the board of directors of the company "Deban Guangdong", estimated the total investment in the cluster construction at $ 5 billion.

To implement the new project, a consortium of investors was formed on the Chinese side, among them Sinosteel Corporation, Rizhao Steel Holding Group, Jianlong Group, said representative of the presidential envoy to the Far Eastern Federal District Yury Trutnev.

The Primorsky Krai is interesting for Chinese investors due to the geographical location, tax incentives in Vladivostok's advanced development and the Freeport of Vladivostok, as well as the availability of a developed port infrastructure in the region, low cost of electricity, proximity to the target markets - Asia-Pacific and South-East Asia, explained the representative of Trutnev. Now in the Far Eastern Federal District more than 20 investment projects with the participation of Chinese capital in the amount of more than $ 4 billion are realized, said the Minister for Development of the Far East Alexander Galushka.

The key project of the cluster will be a metallurgical plant. The company will install electric steel-smelting furnaces, which will ensure the environmental friendliness of production, he stressed. In the second stage (to be implemented five years after the first), it is planned to ensure the operation of the value chain, including the extraction of raw materials, continuous smelting, the production of finished steel products and its sale abroad, and the third - the localization of the production of steel products may be possible be in demand in the regional market: auto parts, components for heavy equipment, components for the shipbuilding complex, he added.

 China is transporting its closing capacities to Russia, says Maxim Khudalov, analyst of ACRA. "We have cheap electricity and labor, and China will buy raw materials in Australia." In 2017, China will shut down 128 million tons of steelmaking capacity, and from 2018 to 2020 - 37 million tons per year, according to Severstal. The reason is a toughening of ecological requirements to the enterprises.

For Russia, according to Khudalov, the main benefit of the project is tax revenues and the creation of jobs in the region. According to Yao Xiaodong, the project will bring the region 50 000-80 000 new jobs.

According to Alexander Losev, General Director of the Sputnik-Capital Management Company, Chinese investors are interested in access to the ice-free port of Vladivostok. The draft steel cluster in Primorye belongs to the project "Economic belt of the Silk Road", the expert believes. On its construction, including sea routes, it will take about 270 million tons of steel, he recalls.