Serial Russian Polluter to Invest $600 Million on Green Projects

MINEX Forum | November 18, 2019 | Views: 33 | Source: Bloomberg

The smoke-belching steel factories near Russia’s Urals Mountains used to be so polluting that the snow-capped peaks turned shades of reddish brown from rust and soot.

Magnitogorsk Iron & Steel PJSC, the nation’s oldest steelmaker, cleaned up the mountains starting from the early 2000s. It’s now going a step further with a program to clean the air from the sulfurous fumes and recycle water. The company is spending $600 million on environmental projects by 2025.

“You won’t see the palisades of red pipes and colorful snow in Magnitogorsk,” Chief Executive Officer Pavel Shilyaev said in an interview.

It’s part of the MMK’s broader strategy to appeal to investors that judge companies based on their environmental, social and governance ratings. When MMK, controlled by billionaire Viktor Rashnikov, gave an update to investors in London on Friday, the environment was at the top of the agenda.

Despite MMK’s focus on pollution, Russia still has a long way to go to clean up its track record for running dirty industries. The country is the world’s fourth-biggest carbon emitter and runs some of the world’s biggest oil and mining operations.

In particular, steel is coming under more investor scrutiny. Steel production accounts for about 7% to 9% of all man-made carbon emissions, according to the World Steel Association.

Given MMK’s size, it’s impossible to entirely move away from conventional steelmaking, Rashnikov said on Friday, adding that the company will try to lower emissions in other ways.

Last year, Magnitogorsk was removed from the list of cities with the most polluted air as MMK slashed emissions, according to a report by the Russian Ministry of Natural Resources and the Environment. MMK has also invested in a local ski resort, which will host the Snowboard World Cup this year.

It will take a long time for the whole steel industry to eradicate fossil fuels altogether, CEO Shilyaev said in an interview. MMK satisfies 40% of its metallurgical coal requirements from its own supplies.

“Carbon-free steel production technologies already exist, but they will not become ubiquitous for at least 15 to 20 years,” he said.

MMK sells more than 90% of its steel into the domestic market, where prices are at a premium to export sales. That’s helped to increase the share of high-value-added products to about half of the steelmaker’s sales this year, the CEO said.

The company plans to keep annual investment at about $900 million per year until 2023, but might accelerate certain projects, according to Shilyaev. In 2024 and 2025, spending will fall to $700 million a year.

While further consolidation of the Russian steel industry is not on the agenda, MMK is open to acquiring smaller assets that would add to its production chain, he said.

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