TBY talks to Maxutbek Yessenov, Chairman of Kazphosphate, on reinvigorating the phosphate sector, the industry’s role in economic diversification, and the possibility for foreign investment.
TBY What was behind the difficulty faced in reinvigorating the market, and how is Kazphosphate positioned today?
MAXUTBEK YESSENOV After the Soviet Union collapsed the demand for products such as yellow phosphorus and fertilizers was very low. Farmers could not afford fertilizers as their priority was oil and machinery when managing their funds. Since 1999 we have been trying to focus on facilities that will have more effect. We dedicated ourselves to rehabilitating the mining industry. Along with that we have been conducting market research to identify the demand for our products. Over a 10-year time period we re-established a customer base, and now our capacity of yellow phosphorus is 120,000 tons per year, whereas exports make up to 60,000 tons per year, which is mainly consumed by our European customers. Establishing ourselves in the European market was difficult due to the breakdown of trust that occurred following the collapse of the Soviet Union. However, according to our calculations we now have approximately an 80% share of the European market for yellow phosphorus. To supply European customers we use rail deliveries; however, exports to regions such as India or other emerging markets are currently not possible due to the geographical distance between our region and the main demand markets, which consequently leads to higher logistics costs.
What trends are you expecting in the fertilizer marketplace?
China is the price setter, and every producer is following what is happening there. Currently, the fertilizer market is stabilizing in terms of price after the economic downturn. We now observe a solid pricing trend. Existing increases in food prices will of course impact fertilizer prices, and we can already see the evidence for prices going forward. Along with that, rising global concerns over food supply chain stability and raw material prices being on the rise will have an impact on prices. We believe that this market will continue to grow, attracting many potential investors in the coming years.
What role can your sector play in the diversification of the economy?
We have several investment projects associated with upgrading the quality of our products and reducing our costs. Undertaking these projects should allow us to expand our product portfolio, and therefore to offer our customers a solid range of products at competitive prices. Among other projects that our company has undertaken is the production of new phosphate derivatives for animal feed. This is a big contribution from our side for the sector, which will bring new customers and new markets to our company and therefore revenues and allocations to the state’s budget. In 2013 we are planning to start the production of pesticides. This has become possible due to the local chemical industry in general developing to a point whereby both upstream and downstream production has been significantly improved. We are an innovation-minded company, and we utilize new technologies to produce products with higher value-added. To achieve our objectives in terms of higher value-added products we have set up joint ventures with international chemical companies that share their technologies and experience with us. Therefore, we are proud to state that we support Kazakhstan’s chemical and agrochemical industry through innovation and cooperation with different local and international supply chain members.
How is Kazphosphate financed?
Over the last decade we have proved that we are a self-sufficient company. We have a strong market share and produce sufficiently due to the diversification of our product range and the volume of exports we undertake to international markets. In terms of financing, we have two options. We acquire financing from local bodies such as Samruk-Kazyna, and we also get financial support from foreign investment institutions such as HSBC and ATF. International cooperation with chemical companies from different parts of the world as well brings additional funding.
What opportunities do you see for foreign investors in your industry?
The local agrochemical and chemical industries are developing well, meaning that foreign investors are focusing on this market. Along with that, they know what the investment climate in Kazakhstan is like. To be specific, we have observed interest from different companies representing states such as Russia, India, and China. Of course, this interest is focused on various areas of our industry, and we also need to consider some strategic long-term partnerships. Keeping this in mind we meet with all interested strategic investors who know that we are a company with a stable position in the phosphate sector. We perform all functions in a vertically integrated business model from exploration to the end product, and this attracts investors.
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