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    Uzbekistan Economics Finance

    Uzmetkombinat prepares for market reforms with licensing of ferrous metal scrap procurement

    Uzmetkombinat prepares for market reforms with licensing of ferrous metal scrap procurement

    Uzmetkombinat (RSE: UZMK), Uzbekistan’s leading producer of ferrous metallurgy products and historically the monopoly operator for the collection and procurement of ferrous metal scrap, has announced a major update in its operations following the decree of the President of Uzbekistan, focusing on accelerating market reforms and aligning national legislation with World Trade Organization agreements. 

    Photo: Uzmetkombinat prepares for market reforms with licensing of ferrous metal scrap procurement 
    Source: Trend

    Current Operations and Market Context

    Uzmetkombinat operates 14 branches across Uzbekistan for scrap collection, encompassing 38 sites with over 1,000 employees. These branches handle the collection, processing, and delivery of scrap and waste ferrous metals. The company's facilities are well-equipped to manage large volumes of scrap, with an annual processing capacity of approximately 700,000 tons. Despite this, the total annual volume of scrap procurement in Uzbekistan is estimated to be between 1.2 to 1.4 mn tons, indicating a substantial unofficial market.

    Historically, Uzmetkombinat purchased up to one third of its scrap at state-set monopoly prices, with the remainder acquired at market prices from private suppliers. This strategy was designed to encourage private sector involvement in scrap collection. Since 2022, the volume of scrap purchased at monopoly prices has halved, reflecting a shift towards market-driven procurement practices.

    Upcoming Reforms

    Starting January 1, 2025, the Uzbek government will introduce a licensing procedure for the procurement, processing, and sale of ferrous metal scrap and waste. 

    This regulatory change aims to enhance control over industry practices, improve occupational health and safety standards, and increase transparency in the sector. By doing so, the government hopes to reduce the shadow economy’s influence and level the playing field for all market participants.

    In preparation for these changes, the Ministry of Mining Industry and Geology, along with the Ministry of Energy, Ministry of Economy and Finance, and other relevant authorities, has been tasked with developing draft regulations by September 1, 2024. These regulations will outline the new requirements and standards for the industry.

    Uzmetkombinat has expressed strong support for these reforms. The company is poised to leverage its extensive and well-equipped scrap procurement network to adapt to the new licensing requirements quickly. With established safety standards and significant demand for scrap, Uzmetkombinat is in a favorable position to maintain and potentially expand its market share under the new regulatory framework.

    The company anticipates that the increased transparency and improved operational standards will create new opportunities for scrap collection and expand its raw material base. This will not only benefit Uzmetkombinat but also contribute to the overall development of Uzbekistan's ferrous metallurgy sector.

    Founded in 1944, Uzmetkombinat is a leader in Uzbekistan's ferrous metallurgy industry. The company operates a manufacturing plant with an annual capacity of over 1 mn tons of rolled products. Currently, it is implementing a large-scale investment program to increase this capacity to 2.5 mn tons per year by 2025. With more than 11,000 employees, Uzmetkombinat’s products are sold domestically and exported to various countries, including Europe. The Uzbekistan state owns over 90% of the company’s shares.

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    04.06.2024, 23:44   Comments (0)   2215
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