Belt and Road 2018: Azerbaijan steel complex

FinanceAsia examines what China’s Belt and Road initiative has actually brought to the world last year. This is the ninth of our 10-part series.

China’s trillion-dollar Belt and Road Initiative is hailed as the “project of the century” as the world’s second-largest economy looks to take the lead role in globalisation historically held by the West.

Much has been discussed about the political, economic and cultural impact that the initiative could have globally since it was introduced in 2013. However, there has been little attention paid to the infrastructure projects in the making.

FinanceAsia will publish a series about the 10 biggest Belt and Road infrastructure deals that have been signed in the 2018 calendar year, and examines which companies are spearheading and likely benefitting from these projects.

The series follows a similar feature in 2017 where we examined BRI projects that started that year. Click here to revisit the feature.

These projects will be published in descending order based on their estimated project value. We will only include infrastructure deals of more than $1 billion.

        9. Ganja Integrated Steel Mill Complex, Azerbaijan

Companies involved: China CAMC Engineering, Baku Steel Company (Azerbajian)

Status: Contracts signed in December 2018

Estimated project value: $1.17 billion

On the surface, the $1.17 Chinese contract to build a steel mill in Azerbaijan might not be a standout among the many Belt and Road infrastructure projects. But in fact, it is a symbolic deal considering the thin exchanges between the two nations historically at the investment level.

China established diplomatic relations in Azerbaijan in 1992. While bilateral trade between the two countries reached a record high of $1.3 billion in 2017, investments were insignificant. So far, China has invested about $800 million into Azerbaijan, Economy Minister Shahin Mustafayev said in July last year.

The figure illustrates the huge significance of the proposed Ganja Integrated Steel Mill Project as the contract value is nearly 1.5 times China’s investment in Azerbaijan over the years. The local economy is also poised to benefit massively as the project is equivalent to nearly 3% of the country’s 2017 gross domestic product of $40.8 billion.

The joint venture between China CAMC Engineering and Baku Steel will construct a steel manufacturing facility at the Ganja region of Baku, the capital city of Azerbaijan. The facility will have a designed iron production capacity of 1.25 million tons and sheet metal capacity of 70,000 tons.

Baku Steel is Azerbaijan’s largest metallurgical company founded by former president Heydar Aliyev in 2001. It is the country’s first privately-owned heavy industry enterprise.

With a contract period of 42 months, the Ganja integrated steel mill project is expected to contribute the bulk of China CAMC Engineering’s revenue over the next four years. The Shenzhen-listed company said the contract value is equivalent to 74.5% of its 2017 revenue.

In a statement on its official website, China’s State-owned Assets Supervision and Administration Commission said the project is of significant importance to China-Azerbaijan relations and will expand China’s market share in Belt and Road countries.

¬ Haymarket Media Limited. All rights reserved.
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