Russia has poured Burmese pig iron // Rostec asks to forgive him a government subsidy for a plant in Myanmar

The change of power and the military coup did not allow the introduction of an iron-smelting plant in Myanmar, which Rostec took part in the construction of. The state corporation received a subsidy from the Russian budget in the amount of 3.5 billion rubles for the project, but it had to return it if the plant was not built. Now Rostec asks to consider the obligations fulfilled, since the plant will not be commissioned due to the fault of Myanmar.

The Rostec State Corporation proposed to recognize its obligations under the agreement on the provision of a subsidy in the amount of 3.5 billion rubles as actually fulfilled. from the federal budget. These funds were allocated to the foreign economic association Tyazhpromexport, which is part of Rostec, for the construction of a 200,000-ton iron smelter in Pang-Peta (Myanmar), according to an explanatory note to the draft resolution of the Russian government. In the project developed by the Ministry of Industry and Trade and posted on regulation.gov.ru, it is proposed to postpone the commissioning of the plant from 2021 to 2023.

The iron-smelting plant is an asset with a difficult fate; from the start of construction in 2004, it faced difficulties. When Rostec received Tyazhpromexport in 2010 from the state, this contract, with an initial volume of € 121.5 million, had already brought € 93.5 million in losses, which was partly due to the bankruptcy in 2009 of the IIB bank, through which the settlements were carried out. That is why it was decided to provide Rostec with state subsidies. In turn, the Myanmar Economic Corporation, which signed the contract, delayed the advance and provided incorrect seismological data for the area, which forced the design documentation to be redone (see Kommersant dated October 24, 2013).

The commissioning of the plant is a sign of the effectiveness of the subsidy, recorded in the contract, that is, if the commissioning date is not rescheduled, Tyazhpromexport will have to return the subsidy.

At the same time, despite the formal postponement of the plant’s commissioning date to 2023, the prospects for the actual completion of its construction are still unclear.

Under the contract with Myanmar, Tyazhpromexport was supposed to carry out design work, supply equipment, perform field supervision, installation supervision and commissioning, test the installed equipment and supervise the commissioning of the plant. Construction and installation work, provision of personnel and commissioning were in the area of ​​responsibility of Myanmar.

However, after the 2016 presidential elections in Myanmar, which was won by Thin Zhuo, a protege of the leader of the Myanmar opposition, Aung San Suu Kyi, the country’s authorities stopped supporting the project. The explanatory note indicates that Myanmar stopped funding the plant in May 2017 and now the amount required for completion is estimated at € 40 million.

After the February military coup in 2021 and the introduction of a state of emergency, the prospects for the project have become completely dim.

The success of the project could promote the export of the Soviet Romelt technology, which allows the processing of low-grade iron-bearing ores. Market prospects could be associated with China, which, according to the director of the corporate ratings group of the NKR agency Dmitry Orekhov, in 2020 increased the import of pig iron from 920 thousand to 5.3 million tons.

China is the largest pig iron producer with a 67% share of world production. “The increase in imports is dictated by China’s attempts to slow the growth of carbon emissions, reduce steel production in China and the overall energy consumption in the iron and steel industry,” says the expert. The dependence of the Asian region as a whole on imports of cast iron is low – it is less than 1% of total consumption.

According to the analyst’s forecasts, iron prices in the Asian region will be fixed at $ 550-570 per ton in the medium term. Additional pressure on prices may be exerted by the Chinese authorities, which are now actively conducting verbal interventions (see Kommersant of June 17), trying to reduce prices for iron ore and other metals.

Evgeny Zainullin

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