Natural resources companies increase production in hope of price hike on commodity markets. The sector increase output by 20% and productivity by 14% in January-July

The raw materials sector is trying to return production to pre-crisis levels this year. In the first half of 2016 the total value of production in the mining sector increased by 20% year on year to KZT4.3tn.

Extractive sectors decreased production for the first time in the past years (since 2009-2010) – by 34%. The decrease was caused by the fall in prices of key export commodities – hydrocarbons and metals.

The situation changed sharply this year as growth in mining output was recorded every month. On average, the monthly output was KZT118bn higher in the first six months than in 2015.

Growth in the sector was helped by the stabilisation of the situation on the global commodity markets, including the oil market where prices slowed down the fall and are fluctuating around $40 per barrel following certain volatility at the beginning of the year.

In this situation mining enterprises posted an average growth of 6.1% a month since March 2016.

Despite the current growth in prices of raw materials Kazakhstan’s mining enterprises continued to optimise their costs by cutting their personnel. The actual number of workers decreased by 13,000 people or 6% in the past year. This is the deepest cut in the past three years.

Redundancies in the mining sector started in 2014 when the number of the workforce was cut by 4,400 people in the first half of the year. This trend deepened and accelerated in the following years.

The job cuts and production growth resulted in higher productivity in the mining sector. In real terms (with account of inflation) productivity increased to KZT19.3m per worker in January-June 2016 from KZT17m in the same period of 2015.

In the past two-and-a-half years the country entered a new crisis as profitability in the mining sector sharply fell from 66% in early 2014 to a record low of 12% in the third quarter of 2015.

In the fourth quarter of 2015 mining companies managed to stop profitability from falling and the rate of profitability reached 13%.

The rate of profitability jumped in at the beginning of this year: it grew to 32% in the first quarter of 2016.