OAO Krastsvetmet is the world’s biggest plant engaged in industry-wide affinage of all the six elements of the platinum group of metals, as well as gold and silver. Currently, about 98% of Russia’s platinum and palladium, virtually 100% of platinum-associated metals and around 50% of the country’s gold are processed at this enterprise. Krastsvetmet’s products are included into the Good Delivery List circulated by such international commodity exchanges as LBMA (London), NYMEX (New York) and ТОСОМ (Tokyo). Igor Tikhov, the company’s general manager, in his interview to Rough&Polished discussed the problems of the world market of precious metals and a possible merger between Krastsvetmet and Norilski Nickel.
In your opinion, what are the development trends in the world’s and Russian metal making industry?
The world metal making industry is not developing all by itself. Everything it produces should be consumed. Of course, if we export ferrous metals and import pipes for the oil industry it looks absurd. The non-ferrous metallurgical industry has another consumption field and after the crisis production of component parts for car and aircraft makers and other manufacturers will be very important. Working for export only narrows the industry’s capacities. We know it from our own experience.
How does Krastsvetmet cooperate with foreign companies in the uneasy economic conditions?
We are collaborating with more than 30 companies scattered across four continents and we are well-known in the world of precious metals. Krastsvetmet enjoys consumer confidence proved by the fact that other companies are currently shipping concentrates worth many tens of millions of dollars to our plant for processing without any bank guarantees.
Today the autocatalyst plant of Johnson Matthey, the world’s biggest company in the field, happens to be our neighbor and partner. The partners respect us since we do what we say, that is we are as good as our word. And this is the main thing in international business.
Krastsvetmet has revised the line of its business during the last five years. In what way has the company’s earning power pattern changed?
The earning power pattern was added an important item related to production and sales of precious metal compounds. Manufacturing of catalyst systems has also turned into a significant item in our output. Naturally, all the years, with the exclusion of 2009, brought in continuously growing revenues from jewelry sales.
In 2009, gold prices are steadily on the rise. How is it reflected on the company’s financial and production performance?
From the point of view of services rendered to gold suppliers this is not a great gain since many of the gold refining contracts are based on fixed prices. There is a small gain in terms of value and volume for jewelry manufacturing but on the backdrop of a downturn in jewelry sales this is just a minor kind of compensation.
Krastsvetmet has its own jewelry production line. Has the current economic situation affected your relations with distributors?
Without any doubt, the economic situation and slumped jewelry sales served to change our relations with distributors. Now we are working with them more purposefully and attentively. We are trying to see the essence of their problems and if it is needed give them a helping hand. The crisis will end in any case and we believe that preserving our relations is the most important thing for a dynamic post-crisis development. Human relations are the only valuable thing which cannot be affected by inflation.
What kind of market share does Krastsvetmet’s jewelry occupy now and what were the means behind such performance?
Our share on the market has most likely remained the same on the background of overall slump in demand. I believe it is 6-8%, as it was before.
How is going silver refining today?
Silver refining reached its peak last year. The facilities put into operation are working at their full capacity and we are now ready to expand. So far 2009 supplies keep lower than in 2008 but the year is not yet finished.
Your company is also manufacturing catalyst grids. What part do they occupy in the company’s turnover?
Their part in the company’s output is not great and it will not be great since our other businesses are sufficiently extensive and voluminous. This business is expanding but in Russia it has a lower capacity than for instance that of jewelry business and it is limited by industrial consumption.
How much promising is it to launch new production lines?
For manufacturers of precious metals diversification is indispensable since different industries are developing by different laws and sometimes their movement is opposite. So some businesses are expanding while others shrinking. The same is true about prices for precious metals. On the other hand, various technological possibilities and variance in promoting your business produce a cumulative effect.
OAO GMK Norilski Nickel and OAO Krastsvetmet were very closely tied to each other. What kind of relationship do your companies have today? How much possible is a merger between Krastsvetmet and Norilski Nickel?
The relations between the two companies have always been friendly and warm since our technological flows are operating jointly in the course of already 65 years. We are continuously collaborating with Norilski Nickel as far as the current operations are concerned, quite often meeting each other and coordinating our work in different aspects. I believe that our cooperation will continue to develop and expand further on. As for merger, this will have no positive or negative impact on the quality of our products. Being a partner of Norilski Nickel, our task is to complete refining of precious metals in time turning out high-quality products.
Your plant remains one of the rare enterprises owned by the Krasnoyarsk Territory and which is paying dividends on a stable basis. To what extent is your company’s profit margin going up?
This year our profit margin plummeted. The main reason was a slump in jewelry consumption in this country and decreased prices for platinum group metals on the international market.
How do you manage then to maintain a rather efficient performance of Krastsvetmet?
This is achieved due to diversification, reliably operating technology, qualified personnel, forward-looking management and esprit de corps.
Is it possible in this anything but simple environment to speak of your plans for 2010? Will your company go into new businesses?
Today we are developing the production of new technical articles made of alloys – glass-melting devices. In 2010 we shall put this production line into operation. And we do not intend to slow down our expansion in the future.
How would you evaluate the current economic situation in the Krasnoyarsk Territory? What industries are able to become locomotives in building up the region’s economy in the nearest years?
The Russian economy has always been dominated by primary industries and so far it is difficult to radically change the situation on a national scale. This is why only the oil and gas industry may become a good prop-up for the non-ferrous industry. Although it is true that wood processing and everything which is being developed in the Krasnoyarsk Territory will also produce a substantial contribution with the lapse of time. Construction will also be expanding since this is a never ending business. As for the machine-building industry, we have to generate concepts as to what and in team with whom should be done and the most important thing – who is going to buy it.
Alexander Shaburkin, Rough&Polished observer, from Krasnoyarsk
