“In 2002, when I was accepted to work at the “Mika-Cement” factory in Hrazdan, I started out by creating the management system,” says general director of the factory Naira Martirosyan. As I take a tour around the factory with the director I witness how an owner has to treat his own property. The production units are clean and everything is in its place and it appears that much has been spent. Let’s hope that it was done on the expense of the company’s profits and that it is not reflected upon the price of the product. Naira Martirosyan is one of the unique women who have obtained work experience by working in a factory. It was interesting to find out her opinion on the outlook for production units in Armenia.
– Armenia needs industrial businessmen whose products are in demand in the domestic market and then they can think about exporting. During the last couple of years, Armenia has registered an increase of construction material production conditioned by market demand. For example, after 2002, the “Mika-Cement” factory increased production levels two-fold (2.5), which makes up 35-40% of the previous levels. Being in a blockaded market, these numbers may already be considered great progress. We increased production volumes on account of our exports to the Georgian and Iranian markets and we have a 50% increase in demand in those markets compared with 2002.
– Back in the years of the Soviet Union, Armenian local cement was considered as competitive as in the European market based on its quality. What are the obstacles for exporting to Europe?
– Our products are in high demand in the European market as well. I am receiving letters asking for 100-200 tons of cement as we speak. But how can we export to Europe when there are no roads? After transporting the cargo to the Batum or Poti harbors of Georgia, we have to rent land, then we need to wrap the cargo in order to load it on the ship’s deck, and that adds to the price of the product. We spend 30-32 drams for transporting one ton of cement from Ayrum to the Poti harbor and transporting by sea is considered to be the most expensive means of transportation. So, after it gets there, our product may not be competitive with its price.
– Have you tried exporting to Russia?
– The factory has exported its products to regional countries in the past too. We have to use transportation by sea in order to export to Russia and there is no point in the case of exporting cement. There are a couple of cement factories functioning in the city of Novorosisk, which is considered the sea gate of Russia. It is impossible to transfer loads of cement by car; it indirectly raises the price of the product.
– In 2002, the price of one ton of cement grew considerably in the domestic market. Why did the company review pricing when there was no increase in prices of power-generators in Armenia?
– The Hrazdan cement factory was not foreseen for cement production during the years of the Soviet Union; it was simply a chemical factory. It was later rearmed as a cement factory that constantly requires investments, and that has an impact on the price of the product. Besides that, the raw material used for cement production, which we import from abroad, is more expensive now. Natural gas is more expensive too. Whereas we used to pay 79 dollars for 1000 cubic meters of natural gas, the price went up to 94.5 dollars in 2004 and currently we pay 101 dollars, starting from this January. Prices for spare parts have also increased. Metal, which we use tons of in production, is 2.5 times more expensive. Whereas we used to pay 200 dollars for one ton of metal, now you can’t find metal for less than 800 dollars. Besides all this, we always have miscellaneous expenses. If the heater stops after the cycle, we have to spend 12-20 million drams on repair.
– Almost all production enterprises of Armenia work with old technologies. Perhaps the investment of new technologies will cut expenses and control the rise in product prices. What are you planning to do in the next three years when the state no longer pays in exchange for the increased natural gas prices?
– If the state did not interfere, it is logical that the price for cement was going to be derived from the natural gas price. We are dealing with another issue. Is there a demand for the product and markets that will justify the need for such investments? It is clear that the new technologies work by reducing energy costs, and that we could have cut staff workers by half if we had the new equipment. Currently, there are nearly 900 people working in our factory and receiving 75,000 drams a month, using the old equipment. We are working in cement production by making extra expenses, and new technology presupposes the shift to dry mode. At present, we are negotiating with 2-3 organizations for investments. We don’t consider large investments risky, and sooner or later there will be a shift to new technologies. Of course, in that case the price of cement will have to go up.
– Do you use the proposals of the local scientific/research institutes for easing this or that process during production?
– I have never received any such proposals. In general, the experience in cement production has grown and we must still apply the existing experience. Of the local factories we were working with the “Construction Machinery” and “Construction Equipment” factories of Charentsavan, but they don’t have the corresponding potential for production. Only one of our two currents functions, and we need 10-15 million Euros in order to start the second current, with the old technologies. We need a 150-200 million Euro investment to transfer to the dry mode of production. But there are some organizations that have agreed to work with us.
– Do you consider the “Ararat Cement” factory as your competitor? It seems as though there is agreement on the prices.
– We have no problem with competition. There is a huge demand in the market and we both sell our products. “Ararat Cement” works in the “dry” mode, while we are in the “wet” mode. We spend more on production, but there is no sense in raising prices. Citizens of Armenia are still not ready to pay the international price for cement. But if natural gas prices reach the international price in Armenia, then increased prices will be inevitable not only for cement, but also other products.
– How much is cement in the international market?
– It ranges. For example, one ton of cement ranges from 250-300 dollars in England.
– The fees on environmental protection have increased for production units. Do you filter the factory’s exhaustions and production wastes?
– To this day we have not paid environmental protection fines. Exhausts are always inevitable in cement production. It is a matter of how much there are. Since Tsakhkadzor is considered to be a resort area, we have invested 6 million dollars to rearm the filtering system. Presently, we have to change some equipment with the 4 million Euros donated by the Danish government, which will reduce the amount of exhaust. We use water for the freezing of equipment during the production process. There is no danger of water pollution. We are getting ready to use the water in a closed cycle, which will save us money.