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The Fate Of Kazakhstan's Largest Steelworks Hangs In Balance

  • Five workers died in a recent mine accident, intensifying scrutiny of ArcelorMittal's operations in Kazakhstan.
  • Concerns persist over environmental pollution and health impacts on Temirtau residents.
  • The government's tough stance raises questions about the steel mill's future and potential replacement investors.
Steel Plant

The billowing smokestacks of Kazakhstan’s largest steelworks loom large over the town of Temirtau -- just like the questions about the future of a plant where the country’s first president began his working life.

Amid a trend of accidents and deaths in the mines that feed the steel mill and longstanding complaints about heavy pollution in the city, authorities have been talking tough on ArcelorMittal Temirtau, an offshoot of the global steel giant ArcelorMittal.

At the same time, they don’t seem to have a plan to replace the investor that entered the Kazakh market almost three decades ago in a deal to revive the Soviet-built steelworks.

Five workers died on August 17 after a fire at the Kazakhstanskaya coal pit -- which is controlled by ArcelorMittal -- in the latest in a string of accidents that have caused some 140 deaths since 1995.

Government rhetoric toward the company had been souring for a while, and this looked to be the final straw.

Speaking to journalists after the tragedy, Finance Minister Erulan Zhamaubaev referenced a “political decision” as having been taken in regard to ArcelorMittal’s exit from Kazakhstan.?

But Deputy Industry Minister Iran Sharkhan gave little away in terms of the authorities’ talks with the company in an official response to questions sent by RFE/RL’s Kazakh Service in September.

He said that the government was working on “the stabilization of the situation at the enterprise” and had issued firm demands to ArcelorMittal regarding labor safety and the need to avoid drops in production.

“It is advisable to address questions regarding [change of] ownership to the owners of the enterprise,” Sharkhan's response read.

Reports that U.S. and EU-sanctioned Russian steel producer Severstal might be waiting in the wings, meanwhile, were shot down by Kazakh First Deputy Prime Minister Roman Sklyar on September 7.

“Work is under way to attract other investors who can work effectively and invest the necessary funds in production. Work safety [is a priority]. But there are no negotiations with the company that you named,” Sklyar told journalists.

Black Snow And Pink Gas Clouds

ArcelorMittal Temirtau has said nothing about the situation, a fact that is adding to the uncertainty felt by workers who spoke to RFE/RL’s Kazakh Service on condition of anonymity.

“At work, our bosses tell us not to worry. But how can you work calmly when there is no confidence? We must understand what is happening and what to prepare for,” said one employee.

From the early years of the steel mill’s operations, Temirtau had a reputation as a town where the air was heavy with metal.

Any hopes that Indian steel magnate Lakshmi Mittal would significantly clean-up production after buying into the operations proved ill-founded.

In fact, the company brought infamy on the city of 200,000 people in 2018 when international media covered an outbreak of black snow.

A company representative cited windless weather as an explanation for that crisis.

In 2021, residents watched from their windows in horror as a giant rose-colored cloud flowed out over the city from the steelworks, apparently due to the failure of filtering equipment.

Many families in Temirtau are third-generation steelworkers.

The emissions barrage has exacted its toll on health, with incidents of cancer, respiratory, and circulatory diseases 20–30 percent higher in Temirtau than the average for Qaraghandy Province, according to official data.

And yet the importance of the behemoth to the regional economy is massive, boasting an annual production capacity of 4 million tons of crude steel and providing a home for the output of eight coal mines and four iron-ore mines.

The plant is also crucially important for ArcelorMittal, becoming the company’s most productive in formerly Soviet countries after capacity at the larger ArcelorMittal Kryviy Rih steelworks plunged after Russia’s full-scale invasion of Ukraine.

But for most of the time it has been in Kazakhstan, the company has been highly secretive.

Viktor Gafiulov, who became ArcelorMittal Temirtau’s new chief after a fatal accident at another of the company’s mines in 2022, told journalists at a press briefing last month that he did not have the authority to answer questions about ownership.

The company ignored two RFE/RL requests for information.

The Post Nazarbaev-Era?

ArcelorMittal Temirtau appeared to have a more comfortable position when Kazakhstan’s former president, authoritarian Nursultan Nazarbaev, was still calling the shots.

Nazarbaev was part of the first generation of Kazakhs sent to work at the newly built steelworks, then called the Karaganda Metallurgical Combine, a migration that provided the platform for his rise through the communist ranks.

And it was Nazarbaev, in the early years of independence, who persuaded Indian magnate Lakshmi Mittal to buy the operation for just over $200 million in the mid-1990s.

The terms of the agreement were never publicly disclosed and opposition political figures alleged that Nazarbaev had more than a patriotic interest in the project.

But his successor, President Qasym-Zhomart Toqaev, has little reason to treat the unpopular company with sentiment as he cemented power last year at the expense of Nazarbaev’s clan after Kazakhstan experienced its most violent unrest since it gained independence in 1991.

Ahead of his reelection in November, Toqaev took swipes at “oligarchic capitalism” and called for increased state scrutiny of ArcelorMittal Temirtau, in particular.

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This year and last year authorities ordered the company to pay fines for tax and environmental violations amounting to more than $10 million.

Toqaev held talks with Lakshmi Mittal in September 2022, with the president’s office later stating that Mittal had promised investments of up to $1 billion to modernize the complex, improve worker safety, and cut emissions.

After the tragic fire at the Kazakhstanskaya mine, Prime Minister Alikhan Smailov suggested that the pledged investments had not been made.

He also blamed ArcelorMittal for a situation that he claimed led to every second worker death in the group’s global operations occurring in Kazakhstan.

“I don’t see prospects for this investor to stay in Kazakhstan given its attitude to production,” Smailov said.

And yet who would arrive in its place?

First Deputy Prime Minister Sklyar has all but ruled out nationalization, citing an adverse impact on the investment climate.

Russian companies might well be interested in the plant given the drastic fall in industrial production after the sanctions imposed on Moscow by the West over the Kremlin’s war in Ukraine.

But those same sanctions make any Russian investment a risky move, especially now that Central Asian trade data is getting international attention. (Exports to Russia from Qaraghandy Province alone accounted for half of the province’s total in the first two months of the year, compared to one-quarter in previous years.)

Experts interviewed by RFE/RL’s Kazakh Service, moreover, highlighted the fact that any new company would have to invest just as much as the government has asked of ArcelorMittal just to bring the steelworks up to spec.

“Without upgrading [the company’s] current assets, it is not such a profitable investment -- a lot of the company’s infrastructure is worn out,” said economic analyst Rasul Rysmambetov, arguing that he expects the two parties to “haggle” before any major decisions are made.

By RFE/RL

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