Economic review

The Chelyabinsk region ranks among the most scientifically and industrially developed regions in Russia.

It is the 7th among Russian subjects in respect of industrial production volume, 13th in respect of gross regional product (the regional export comprises 1,8% of general volume in Russia) and it is one of the five Russian regions with the largest production output per capita.

Among the Ural Federal District Subjects the Chelyabinsk region ranks 3d in respect of industrial production output growth, 1st -  in respect of accommodation building growth and 1st -  in respect of tax  collection.

Over 1,5 million people are occupied in various branches of economics, that is 42% of the region population.

The Chelyabinsk region has advantageous geographical and economic position; it possesses various raw material deposits and is situated at the crossroads of the East and the West, which connects the region with the central part of Russia, Siberia and Kazakhstan.

The density of railroads network is about 43,9 km per 1000 sq. km.

The density of automobile roads network is about 174,3 km per 1000 sq. km. The length of paved highways per 1 sq. km in the Ural region exceeds the average length by one third.

The Chelyabinsk airport has the international status and can receive the aircrafts of all types except for Boeing-747. The Russian airlines make regular flights to Germany from the Chelyabinsk and Magnitogorsk airports, and charter flights are made to a lot of countries of Europe and Asia.

Industrial branches such as metallurgical, machine-building, metal processing, fuel-energetic, constructing and agro-industrial determine the whole region’s development.

Among the Ural Federal District Subjects the Chelyabinsk region is  more advantageous, because it enjoys  a lot of favorable factors such as a big number of iron ore deposits and close location to the Kuzbass and Karaganda coking coal deposits.

 

Metallurgy

 

As far as metallurgy is concerned, the Chelyabinsk region is the leader among the Russian regions. Metallurgical enterprises produce 26,8% of the total output of the cast iron in Russia, 25,9% - of steel and 14,4%  - of steel pipes.

Regional industrial policy concept defined the main problems of development of metallurgical complex and state support measures for the 2000-2005 period.

Ferrous metallurgy is represented by 28 large and medium-sized enterprises. The most important enterprises are:

 

·        The largest enterprise in the country - the Open Joint Stock Company “Magnitogorsk Steel and Iron Works” (57,2% of metal production in the region);

·        The Open Joint Stock Company "Mechel"(16,7%), specializing in the production of alloyed steel;

·        The Open Joint Stock Company “Chelyabinsk Electric Integrated Iron & Steel Works”

·        Metallurgical plants located in the mining industrial areas of the Urals (OJSC “Ashinsk Iron and Steel Works”, OJSC “Magnetite Plant”, situated in Satka, OJSC “Satka Cast Iron Smelting”);

·        Plants producing steel pipes and hardware (OJSC “Chelyabinsk Pipe Rolling Plant”, OJSC “Magnitogorsk Metise Iron & Steel Works”, CJSC “Miniar Metise Iron & Steel Works”).

 

Besides, ferrous metallurgy is represented by the old plants located in the mining industrial areas, i.e. in the city of Asha, Ufaley, Satka, Zlatoust. All of them have rich history. For instance, one of the renowned centers of Russian metallurgy, the city of Zlatoust, is the birthplace of Russian damask steel, the creator of which was P.P. Anosov, one of the founders of the steel study.

The main target of the ferrous metallurgy development in the Chelyabinsk region is structural reorganization of the enterprises in the current economic conditions; increasing the efficiency of the metal production on the basis of the competitive industries expanding; coping with the development related problems by means of own resources.

Investments needed for the renewal and modernization of the ferrous metallurgy of the region are estimated at approximately 17 milliard rubles for the 1999-2005 period.

 

Non-ferrous metallurgy

 

There are copper, zinc and nickel industries in the region. The first nickel industrial plant in Russia was founded in 1935 in the city of Verchniy Ufaley. It has been working on the basis of Cheremsha nickel deposit, famous since 1907. It soon became possible to extract cobalt there, which was unique  in Russia at that time. Copper is produced on the enterprises situated in Karabash and Kyshtym, zinc is produced on the Chelyabinsk Electrolyte Zinc Plant. Non-ferrous metallurgy of our region provided about 100% of total demand for zinc and an overwhelming part of demand for refined copper. Chemical industry works on  ferrous and non-ferrous metallurgical complexes’ waste. It gives us nitrogen fertilizers, sulphuric acid, varnish-and-paint articles and is situated, as a rule, in the metallurgical centers.

 

Non-ferrous metallurgy is represented by the enterprises of the following groups:

 

·        Ore mining and processing enterprises (Open Joint Stock Company "Ore mining company of Alexandrinsk", Open JSC "South Ural Gold Association”);

·        Nickel and cobalt industries (Open JSC "Ufaleynickel");

·        Zinc industry (Open JSC "Chelyabinsk Electrolyte Zinc Plant");

·        Copper industry(Closed JSC "Karabash Copper", Closed JSC "Kyshtym Copper Electrolyte Plant");

·        Electrode industriy (Open JSC "Chelyabinsk Electrode Plant").

 

Copper, zinc, nickel, electrode products are the most important items of the production.

It is necessary to solve several problems for the successful operation of the non-ferrous metallurgical enterprises: to expand the internal and CIS markets of the metal production; to raise the competitiveness of the industries and their production; to speed-up the structural reorganization; to decrease the resources and power consumption of the industries; to attract the investments needed for industries' support and development; to raise the efficiency of exports, to improve the ecological situation in the areas where the enterprises are located.

 

Machine building and metal processing

 

Machine building is one of the key branches of the Chelyabinsk region economy. Its specific share in the total industrial output comprises 14%. The machine building staff consists of 162 thousand people, that is 39% of all employees in that sphere.

The machine-building complex is represented by automobile industry (25,3%), tractor and agricultural industries (14,1%), lathes and instrument-making industry, metallurgical, road-building and municipal, electro-technical, shafting and mining machine-building as well as enterprises outputting constructions and articles of metal.

On an equal footing with ferrous metallurgical industrial complex and non-ferrous metallurgical industrial complex is the machine building and metal processing industrial branch, which is rather developed. Nowadays its share in the total industrial output comprises 14%, in the pre-reform period (1991) this share was two times as great.

Machine building and metal processing complex comprises heavy industry, in particular production of mining metallurgical equipment, wagons including streetcars, tractors, goods vehicles, road cars, etc. Enterprises of the Chelyabinsk region provide 90% of the overall production of bulldozers, 15% - of tractors , 11% - of goods vehicles, 26% - of auto graders , 13% - of excavators and 91 % - of cranes with caterpillar tracks.

Such consumer goods as fridges “Polyus” and “Yuryuzan”, washing machines “Chaika”, radio equipment and watches of different brands are produced in the region.

The machine building and metal processing branch of industry is represented by 105 machine building enterprises, 17 enterprises producing metal constructions and instruments, 37 machine repair enterprises.

The number of enterprises is not the same in all cities. Most of them are situated in the city of Chelyabinsk: Open JSC “Chelyabink Tractor Plant”, one of the biggest enterprises producing tractors; plants producing goods vehicles (Kolushenko plant), lathes (“Stankomash”, Chelyabinsk Blacksmith Press Plant), radio instruments, watches, etc. Transport machine building is represented by heavy goods vehicles production (the city of Miass), wagon making (the city of Ustkatav). The leading enterprises of the branch are Open JSC “Ural Automobile Plant” – 15,8 % of machine building production, Limited Liability Company “Chelyabinsk Tractor Plant” – “Uraltrak” – 9,1%.

Many important enterprises of machine building and metal processing complex are situated in the cities of Troitsk, Zlatoust, Kyshtym, Kusa. There are also enterprises of military industrial complex in the region. The majority of enterprises of military industrial complex possess powerful techniques and industrial potential as well as highly qualified labor force; this makes the conversion of the defense enterprises possible.

The principal targets of machine-building industry are: to preserve and promote the scientific and technical potential; to reduce and restructure unprofitable enterprises and industries; to change the range of the goods produced; to apply the most useful elements of the industrial, scientific and technological potential of the defense machine-building to upgrade the civil machine-building.

The sufficient increase of capital investments is needed for the development of the machine building and metal processing industrial complex, the investment volume for the 1999-2005 period should comprise 1596,7 million rubles including 833,5 million rubles of capital investments and 39,3 million rubles of the Scientific and Experimental Research Institute of Machine Building.

 

Conversion of the defense enterprises

 

There are about 30 enterprises and organizations of defense industrial complex in the Chelyabinsk region. They comprise 13 state enterprises including 3 enterprises of Atomic Energy Ministry. The rest are joint stock companies, of which only one share holding is the federal property, except for Open Joint Stock Company “Mechanical Plant of Yuriusan”, OJSC  “Bulat” Plant and OJSC “Kasli Mechanical Engineering Plant” where there are no shares. The management of these companies includes representatives of the regional and municipal administration, under jurisdiction of which they work.

Defense industrial complex enterprises are traditional among large producers of tramcars, metal cutting machine tools, air traffic control systems, civil aircrafts and helicopters navigation systems, landing control systems, excavators, navigation devices for navy ships and air fleet, household appliances, refrigerators, cleaning, laundry and kitchen equipment, radio receivers, electrical engines as well as galvanic elements, synthetic piezoelectric elements, ceramic radio articles and a number of other products.

Due to the advanced conversion of military enterprises over the last years, a wide range of complex consumer goods are produced along with goods for many industrial branches, agriculture with its reprocessing branches as well as for ecology, medicine, energy savings, transport network and communications.

One of the priorities in the enterprises development and military industry structuring is to expand export supplies of both civil and defense industryial goods. The main advantage of export orientation is the possibility to draw considerable funds into enterprises instead of using money surrogates available currently on the Russian domestic market.

Since 2002 the enterprises of defense industry have been transferring into the stage of reforms and re-construction according to the federal program titled “Reforms and development in the Defense Industry (over 2002 – 2006) approved by enactment of the RF government on October 11, 2001", #713. In the process of reforming of this brunch there will be established a number of holdings as  the key directions, which will be concentrated in the hands of the state officials.

 

Fuel and energy complex

 

Massive industry of the South Ural cannot function without fuel and energy supplies. Fuel industry is represented by coal branch and Chelyabinsk brown coal coalfield. The main coal consumers are power stations, industrial boiler houses (almost 80 %), municipal departments, common people.

Fuel and energy complex is represented by electric power generating industry, coal mining, fuel industry, trunk pipeline transport.

Since 1999 total coal mining has decreased by 2 times. Half of all coal supplies are explored on the surface, because their deposits are not very deep. Kopeisk is the main coalfield center. It was founded as a miners’ village in 1906 and was called Chelyabinskie Kopi. The other half of coal supplies explored on the surface are in Korkino. Korkino is situated 35 km away from Chelyabinsk. At the moment the Chelyabinsk coalfield is almost completely worked out. The coefficient of extraction of coal from the depths is 86 %. Although there are also Poltavskoe and Bredinskoe anthracite deposits, coal supplies are insignificant, strata are weak and mining is unprofitable. These deposits are preserved and are not explored at the moment. Due to the shortage of coal, it is delivered from Ekibastuz, Kuzbass and Karaganda. Industry of the region becomes natural gas oriented. Gas is also delivered from other regions.

There is a tendency for growth in energy consumption, especially in agriculture and transport.

Taking into consideration the power-consuming character of the key industries of the region there exist vast possibilities for inculcation of the energy-saving technologies.

The main part of consumption of fuel resources falls on coal (about 50%) and natural gas (about 40%).

Coal-mining enterprises of the Chelyabinsk coalfield practically cover the region’s requirements in coal for the electric and heat energy generating industry perfectly.  The export of the coking coal to the region is carried out to provide for the needs of the metallurgical complex.

The demand for natural gas and oil products is covered completely by their delivery from the other regions.

The fuel and energy complex of the region has many branches; it supplies hundreds of enterprises with energy. Energy is produced mostly on Troitskaya, South Ural Hydro Electric, Argayash and Chelyabinsk power stations. All of the region’s stations work in the united Ural and European systems of energy supply, this helps to replenish their own energy supplies.

Electric power stations of the region provide about 65% of the total demand for electric power.

In 2003 the electric power stations of Chelyabinsk region generated 22 038,2 kWh of electric energy.

The key enterprise of the electric power industry in Chelyabinsk region is OJSC “Chelyabenergo” (454000, Chelyabinsk, Revolutionary square 5, tel: (351) 267-83-50, 263-96-14, http://www.chel.elektra.ru) The total energy output by the regional electric power stations is 39% of the whole electric energy generated in the Chelyabinsk region. The energetic system of “Chelyabenergo” is an integrated part of the single energetic network of the Russian Federation.

In addition to OJSC “Chelyabenergo”, a large generator of the electric energy is OJSC “Troitskaya Hydro Electric Power Station”. This enterprise is an associated joint-stock company of JSC UES (Russian Joint Stock Company of the Unified Energy Systems). The station has the planned generation capacity of 2500 MWt. In 2002 there was generated 28% of the total energy volume in the region.

A number of large enterprises in the Chelyabinsk region, such as OJSC “Magnitogorsk Iron and Steel Integrated Works”, OJSC “Mechel”, cover a considerable part of requirements for electric energy at expense of their own energetic capacities.

The principal aims of this complex are: restructuring of the coal-mining industry of the region; technical refurbishing and upgrading of the Fuel and Energy Complex of the region; gasification promotion in industry, electric power generation, municipal and consumer services; creation of the power generating capacities on the basis of the up-to-date gas-turbine technologies and thermoelectric power stations with circulating fluidized beds; carrying out the policy of energy-saving and increasing the utilization efficiency of the fuel and energy resources by means of technical and technological re-equipment of the industries along with the rapid reduction of their power consumption.

Total reconstruction and development of the fuel and energy industrial branch requires 1332, 1 mil. rubles of region’s investments during the period of 1999-2005.

 

Constructing complex (building materials industry)

Light and food-processing industries

 

Light and food processing industries are mainly represented by flour threshing, leather footwear, clothing and textile enterprises. In terms of new market system there has been opened a lot of mini-bakeries, small workshops processing meat and milk and producing cheese in the region.

 

Agriculture

 

Agricultural sector in the region is well developed. In gross domestic product the share of agricultural complex is about 4,6 %. The Chelyabinsk region specializes in vegetable growing and animal husbandry. Ploughed fields, hayfields and dried out fields occupy 3/5 of the region’s territory.

The main part of the territory is situated in the steppe zone. 2/3 of cereals are spring wheat. Another part of the region’s territory sown with cereals is represented by rye and millet. Potato crops are of great importance. Among industrial cultures sunflower is the most widespread. Fodder crops are the basis for animal husbandry. They are mainly grown on natural arable and pasture lands (about 1 million hectares).

Gardening is also very popular. More than 600 thousand gardens joined 860 garden partnerships. Their area surpasses 32 thousand hectares.

 

Other industrial branches

 

The Chelyabinsk region possesses a great amount of forest lands, but all of them are invaluable birch-aspen forests. A significant part is situated in the eastern regions and belongs to the water-protected area.

Timber processing industry (sawmill and woodworking industry) is concentrated in the cities of Chelyabinsk, Magnitogorsk, Kopeisk, Miass.