Armenian Mining Sector Rebounds Amid Rising Metal Prices

YEREVAN (RFE/RL)–Armenia’s mining and metallurgical companies, the largest export-oriented sector of the national economy, appear to have ended 2009 with significant production gains resulting from a rally in global prices of copper and other base metals.

Official statistics show their combined production of non-ferrous metals and metal ore concentrates growing by roughly 14 percent to 152.8 billion drams ($424 million) in the first eleven months of the year.

The figure was equivalent to just over a quarter of overall industrial output which shrunk by 10 percent in January-November 2009. The Armenian economy as a whole contracted by 16 percent year on year during that period.

The collapse of international commodity prices in the second half of 2008 was one of the reasons why Armenia was hit particularly hard by the global economic crisis. It not only slashed the country’s modest export revenues but also forced local mining factories to lay off or send on indefinite leave hundreds and possibly thousands of workers in the beginning of 2009. Some of those enterprises halted their operations altogether.

In a bid to shore up the struggling sector, the Armenian government allocated in June $44 million in emergency loans to the Zangezur Copper and Molybdenum Combine, the country’s largest industrial enterprise, and another, smaller company. That and, more importantly, rallying metal prices enabled the sector to start recovering from the crisis.

Data released by the National Statistical Service (NSS) show that the growing value of copper, Armenia’s main mining item, in world markets was the key factor behind the recovery. The copper price more than doubled in 2009 and reached a 16-month high of around $7,500 per metric ton this week. It rose by more than 36 percent in the last three months alone and may well get closer to the pre-crisis peak level of about $9,000 per ton in the months ahead.

The NSS at the same time reported decreases in the production of other non-ferrous metals extracted in Armenia, notably molybdenum and zinc. Their international prices have been bouncing back far more slowly.

The sector was also greatly helped by a near doubling of output at the Yerevan-based plant Armenal, which is owned by the Russian aluminum group Rusal. Armenal’s main product is aluminum foil.

The production gains have yet to reflect positively on Armenia’s net exports which tumbled by as much as 37.4 percent to $624 million in January-November 2009. Ore concentrates and metals accounted for just over half of that, solidifying their status as the country’s largest export item. Still, export revenue from them fell by 34 percent in absolute terms, according to the NSS.

Authors

Discussion Policy

Comments are welcomed and encouraged. Though you are fully responsible for the content you post, comments that include profanity, personal attacks or other inappropriate material will not be permitted. Asbarez reserves the right to block users who violate any of our posting standards and policies.

3 Comments

  1. Ara said:

    An economist friend of mine responded to this article and said that we shouldn’t “confuse value (i.e., nominal) with volume (real). Dollar price having gone up by 50 percent and dram having lost 20 percent value (all during the period in question), the 14 percent nominal increase in the dram value cited in the article means a huge decline in volume.” In other words Dollar value of mining in Armenia went up during 2009, but that doesn’t mean that Armenia produced more copper and other minerals. This implies that the title of the article could be misleading.

  2. Dave said:

    Curious to see when, if ever, some of these mining companies (which are directly or indirectly owned by the country’s current and former political leadership) will be paying back their fiscal stimulust funds, which the government injected into them using the moneys borrowed from Russia and the World Bank….at the expense of much-required additional social spending. 

    Related to this, I am curious to know how much more taxes these companies paid to the state budget after their revenue went up by 14 percent. Under normal circumstances (i.e., unchanged tax regime and compliance as well as proportionate taxation) their tax contributions would have gone up by roughly 14 percent. I encourage the authors to follow up on this issue and report back to us when the tax authorities publish their annual list of 300 largest tax payers, which includes most of these mining companies. 

  3. Pingback: Armenian Mining Sector Rebounds Amid Rising Metal Prices | Asbarez … | Drakz Free Online Service

*

Top