among Russian economists in Vogue to advise the government which areas of the economy need priority support. Most agree that help should first small and medium business. Allegedly, this is mainly a service sector that is closest to the final consumer: demand, needs, jobs, and everything we love.
don’t know. No, what concerns direct social contact or improve the quality of life, then the pillars of the domestic economy are absolutely right. But the fact of the matter is that if we’re going to stimulate consumer demand, and it is the Foundation of any economic development, it would be good in the beginning to understand what income and reserves this demand support.
the State represented by the Ministry of Finance and the Central Bank, of course, may issue additional funds, but it is better to have constant private supply from the real sector, as SMEs, let’s be objective, hopes, not so much. Moreover, as the lifting of restrictions small business will recover quickly without any additional effort. As to the manufacturers, the main thing is not to put in crisis the stupor of the key revenue generating industry.
One of these industries – metallurgy, mainly non-ferrous metallurgy, embodies the modern production of deep enough redistribution with high added value. Problems in this industry over recent months, appeared above the roof, and it is not only rent-free period or loans for the employees.
On the example of individual aluminum industry I am ready to show how the support measures will result in increased production under the secured sale, and while
Nature of turbulence
1. Problems in our nonferrous metal in the first place – in the aluminum industry began even before the introduction in Russia of the social restrictions: the world as we know, have stayed in before. In our case the situation was exacerbated by the fact that the domestic industry-consumers of aluminum products, automotive industry, aviation industry, manufacture of building structures, energy, packaging, appliances and other – also had to be paused.
At the same time, the high level of aluminum consumption – a typical feature of the modern economy, which is developing non-raw material sector and processing and high-tech manufacturing. Therefore, comprehensive support of the aluminum industry, and today is helping not only producers but also consumers of aluminum products is a concrete step in the transition from raw to hi-tech models ek��economy.
2. That aluminum plants, and they are often the largest employers in the regions of presence, together with its workers deeper into the depths of the crisis, not so bad. The second half account for related activities, also bearing significant losses, e.g., electricity.
But first, on the social responsibility of manufacturers. Today in towns with town-forming enterprises of the nonferrous metal is home to 900 thousand people. The only aluminum company, and only in 2018, invested in the surrounding community about 22 million. and their future pension contributions (contributions) and current (payments) to retirees amounted to 173 million dollars.
About energy. According to the energy Ministry, in 2019 on the positive dynamics of change in energy consumption was affected primarily the growth of electricity consumption BEMO smelter (Krasnoyarsk power system) and the plant in Bratsk (the Irkutsk region power supply system). In General, ferrous metallurgy accounts for more than 13% of electricity consumption in the country. It is easy to guess that now this share has declined substantially, therefore, decreased revenues of the energy and contributions to the Treasury.
What is very important, the production of aluminium support the demand in Russia for “clean” and safe from the point of view of the climate change hydropower. More than 90% of the Russian aluminium produced using electricity from renewable sources. Power generation, primarily for Siberian HPPs, grew up in 2019 (3.6%), and in April of this year (21.5%). Despite the fall of production and consumption of electricity in the country as a whole.
3. Unresolved issues in the aluminium industry would not only hinder the economic recovery and slow the development of high-tech industries, but will ricochet on the consolidated budget, primarily on its regional component. Instead, delete “aluminum” from the list of regions problematic, we risk more headache, and, at his own folly.
For the Russian manufacturers of aluminium there is a risk of reduced capacity to 40% – that is, stopping at least three plants and reduce production by another two. In turn, the business stop, which is a key taxpayers, will cause a lot of negative consequences and quite possibly lead to the destabilization of the social situation in a number of Russian cities.
as for the restart of aluminum production, it is possible, but very expensive. In 2018 the project for the resumption of production of molten aluminum in only one of the Volgograd plant, mothballed in 2013 required expenditures to 8 billion rubles.
the Market is waiting for
Well, the government support of Russian producers of aluminium, and where to put the finished products? To the warehouse? In the state reserve? Not at all. Russian aluminum will be in demand on the world market, as evidenced by the following facts.
1. The Russian steel industry is now not a load of commodities and one of the most innovative industrial sectors of the economy. The OECD estimates that over the past 15 years, Russia significantly increased the production of the same aluminum semi-finished products of high degree of processing.
the Share of investment in the modernization of metallurgical enterprises in recent years significantly exceeded the national average in 2018 it was 27% vs. 16% average for all industries. Innovation-active was 31% of the enterprises of metallurgy compared to 13% of the national average.
however, investments in the highest value-added products – is an investment in one of the most popular industrial sectors in the future. Due to the high demand for the lightweight metal, its high environmental friendliness due to the possibility of re-processing, aluminium production has good prospects for development after the lifting of restrictions. For reference: during the crisis of 2008 the demand for flat products in the EU fell by 5%, but then began to recover in 2018 exceeded the pre-crisis level of 2007 by 11%.
2. Our producers have won a significant niche for certain types of high value added products. For example, Russia on the EU market ranks second after China in the structure of import of aluminum extrusion profile (9% of imports in 2018). However, competition with Chinese partners remains high enough that, so also unequal.
3. The Chinese government, and the aluminium production in China today accounts for about 54% of the world total in 2013-2017 was allocated to support each manufacturer at 8-9 billion dollars. (again, the OECD). Chinese enterprises receive subsidies for compensation of expenses of electricity, have access to cheap funding, enjoy tax benefits, they facilitate the export. Currently, China has become a net importer of raw aluminium, which it processes at its plants and sells finished products.
Chinese manufacturers, but without state support many of them have long been bankrupt, increasing their presence on world markets, adversely affect the financial position of other participants that maintained artificially low prices for finished products.
You ask – and what are we? Nothing. For the first quarter of 2020, exports of aluminium fell by over a third, amounting to 65.9% in absolute values and 64,3% in the money from the corresponding period last year. Only in the sea port “Saint-Petersburg” handling of aluminium in the first three months of this year decreased by 20%.
Support domestic produce��her aluminium and will receive a significant increase in development with the implementation, not only in domestic but also in foreign market. Don’t know about you, but to me the benefits of such a combination is obvious. And employees for related industries, and for the budget. So, for the more active stimulating final consumer demand, as mentioned in the beginning.
