ФЕРРОСПЛАВЫ

FERROALLOYS

Vitaly GNATUSH, expert with DerzhZovnishInform

UKRAINE

According to the results of the first three quarters of
2001, the Ukrainian ferroalloy market has indicated an ambiguous situation. In particular,
in the first 9 months of 2001, the average output of electroferroalloys in Ukraine added
0.4%, whereas exports of this commodity category augmented by 17.9% (Table 1). At the same
time, notwithstanding the 7.7% growth of average monthly production in Ukraine in the
current year, domestic consumption of ferroalloys dropped by 22.3%. Simultaneously,
Ukraine’s mean monthly ferroalloy import increased 28.1% in comparison with the figure
reported in the corresponding period of 2000.

In January-September 2001, according to data with
Metallurgprom Association, Ukrainian ferroalloy works (Nikopol, Zaporozhye, and
Stakhanovskiy) produced 1.098 million tonnes of ferroalloys, which is equal to 113% of the
last year’s corresponding period’s output.

It must be noted that in comparison with the last year,
Zaporozhye Ferroalloy Works augmented its average monthly output by 10.9% and Nikopol
Ferroalloy Works – by 7.5%. At the same time, Stakhanovskiy Ferroalloy Works is still
around 3% behind its last year’s performance. Just as before, Nikopol Ferroalloy Works
is the main Ukrainian ferroalloy producer accounting for around 57.4% of the country’s
ferroalloy output. It is followed by Zaporozhye Ferroalloy Works (29.1%) and Stakhanovskiy
Ferroalloy Works (13.5%).

Steel production and ferroalloy production are naturally
and understandably interconnected. This is why, monitoring of the global steel production
can provide valuable information for successful forecast of the situation on the
ferroalloy market.

According to data with the International Iron and Steel
Institute (IISI), steel output by 64 countries worldwide totaled around 620.1 million
tonnes in the 9 months of 2001, which was 0.1% lower than the figure registered in the
last year’s corresponding period (Table 2).

On the other hand, global steel output came to 68.1 million
tonnes in September 2001, which was 0.2% higher than the figure reported in August of the
current year and 0.3% lower than that of September 2000.

It must be pointed out here that in comparison with the
last year’s respective period, in the first 9 months of 2001, the largest increments of
steel production were reported by African countries (+20.3%), whereas Oceania exhibited
the worst production decline (-12.5%). Just as before, Africa, Middle East, and Asia are
the three most dynamically developing regions. CIS countries, with the steel output
increment of +2.9%, are ranking 4 (Table 2). It must be noted, however, that Russian steel
production lowered to the last year’s figures in 9 months of 2001, whereas on the other
hand, Ukraine has maintained the positive tendency (+8.9%). The USA continues indicating a
negative tendency in its steel production (-11.4%).

Four economic and geographic conglomerates (namely, Asia,
the EU, North America, and the CIS) contribute most to the global steel production
collectively accounting for 86.1% of the world’s steel output.

Thus, the period of January-September 2001 has exhibited a
positive impulse in global steel production: the average monthly output is equal to 101.3%
of the 2000’ figures. Analysis of the global steel production’s dynamics and the mean
monthly figures of the first 3 quarters of the current year allows forecasting this year’s
total steel output at 830,000-835,000 tonnes against 828 million tonnes in 2000, i.e. the
increment is going to come to 0.2%-0.8%.

The slowdown of development rates of the global steel
production could not but affect global trade in ferroalloys.

In the first 3 quarters of 2001, Ukrainian monthly
ferroalloy export fluctuated between 70,800 tonnes (February) and 92,900 tonnes (August)
(Figure 1).

In 9 months of 2001, Ukrainian total ferroalloy exports
augmented by 21.4% against the last year’s respective period. This tendency was
primarily contributed by the growth of exports of ferrosilicon (+41.3%) and
ferrosilicomanganese (+18.6%). Ferromanganese exports are approximately 0.1% behind the
last year’s figures.

In general, according to preliminary data, Ukraine’s
exports of both basic and light (small-tonnage) ferroalloys in the period of
January-September 2001 totaled 728,700 tonnes worth USD 296.5 million.

The structure of Ukraine’s ferroalloy exports has changed
in 2001 in comparison with the last year. For example, the share of ferromanganese in
ferroalloy exports reduced to 19.6% in 9 months of the current year against 23.2% in 2000,
that of ferrosilicomanganese – to 53.4% (against 55.4% in 2000), whereas the
ferrosilicon’s contribution to Ukrainian exports went from 19.7% to 23.0%. The share of
light (small-tonnage) ferroalloys in total exports continues its gradual growth. This year
it has increased to 4.0% against 1.7% in 2000.

The geography of destinations of Ukraine’s ferroalloy
exports has expanded in 2001. In the first 9 months of the current year, Ukraine has
exported its basic and light ferroalloys to 42 countries worldwide.

Analysis of regional distribution of Ukraine’s ferroalloy
exports in 8 months of 2001 indicates that just as earlier, CIS countries are the main
consumers of Ukrainian ferroalloys accounting for 41.8% of Ukraine’s total exports of
this commodity category (304,800 tonnes). Ferrosilicomanganese accounts for 54.5% of
Ukraine’s CIS-bound ferroalloy exports, ferromanganese – for 33.7%, and ferrosilicon
– for 10.0%.

The Russian Federation is Ukraine’s main trading partner
not only within the CIS but also among all the countries, to which Ukraine exports its
ferroalloys. In the first 9 months of 2001, Russia imported 255,800 tonnes of ferroalloys
from Ukraine, which was equal to 35.1% of Ukraine’s total exports. On the other hand, it
must be noted that Russia’s share in Ukraine’s ferroalloy exports has reduced. In the
first 7 months of the current year, Russia accounted for 39.5% of Ukraine’s exports,
whereas now it has decreased by 4.4%. In Russia-bound ferroalloy exports from Ukraine
ferrosilicomanganese accounts for 57.0%, ferromanganese – for 33.7%, and ferrosilicon
– for 7.3%.

Asian countries rank 2 among consumers of Ukrainian
ferroalloys (27.4% of the total exports or 199,300 tonnes). Ferrosilicomanganese accounts
for 66.4% of all supplies to this region, ferrosilicon – for 26.5%, and ferromanganese
– for 7.1%. The largest Asian buyers of Ukraine-made ferromanganese are Turkey (93,700
tonnes), Saudi Arabia (33,200 tonnes), South Korea (27,300 tonnes), and Japan (26,600
tonnes). These four countries aggregately account for around 90.7% of all Ukrainian
ferroalloy supplies to this region.

East European countries rank 3 in the geographical
structure of Ukrainian ferroalloy exports accounting for 10.4% of physical ferroalloy
exports from Ukraine (or 75,700 tonnes). Out of this quantity, ferrosilicon made up 49.4%,
ferromanganese – 28.0%, and ferrosilicomanganese – 22.5%. The largest buyers of
Ukrainian ferroalloys in this region are Romania (36,200 tonnes), the Czech Republic
(12,000 tonnes), Poland (12,700 tonnes), and Bulgaria (5,000 tonnes), which together
account for 87% of the total supplies bound to this region from Ukraine.

West Europe is just a little behind Eastern Europe in terms
of Ukrainian ferroalloy exports (10.3% of the total). The EU countries account for 10.1%
of Ukraine’s ferroalloy exports. The following countries purchase the most substantial
quantities of Ukraine-made ferroalloys: Sweden (16,000 tonnes), Germany (15,400 tonnes),
Finland (11,600 tonnes), and Italy (7,600 tonnes), which collectively account for 68.6% of
Ukraine’s total supplies to the Union.

In terms of individual commodity groups, the situation with
basic ferroalloy exports from Ukraine was as follows in January-September 2001.

Ferrosilicomanganese was supplied to 26 countries
worldwide, which is a better figure in comparison with the last year (21 countries).
Mostly, this commodity was exported to CIS countries (42.7% of the total), Asian countries
(34.0%), and North America (7.4%). The five largest ferrosilicomanganese consumers include
Russia (145,900 tonnes), Turkey (57,800 tonnes), Saudi Arabia (28,400 tonnes), South Korea
(25,800 tonnes), Egypt (20,400 tonnes), and Canada (17,800 tonnes). These countries
consume 76.1% of Ukraine’s export supplies of ferrosilicomanganese. It is noteworthy
that this year’s average monthly ferrosilicomanganese export is around 14% higher than
the last year’s figure.

Ukraine sold ferromanganese to 23 countries this year
against 15 countries in 2000. Three largest Ukrainian ferroalloy-consuming regions are the
CIS (72.0% of the total physical exports), Eastern Europe (14.8%), and Asia (9.9%). Just
as before, Russia is the largest buyer of Ukraine-made ferromanganese (86,300 tonnes or
60.4% of the total figure). It is followed by Romania (16,400 tonnes), Kazakhstan (12,200
tonnes), Iran (7,800 tonnes), and Saudi Arabia (4,700 tonnes). These five countries
purchase 89.2% of all ferromanganese exported by Ukraine. The average physical export
figure reduced to the level reported in 2000.

Ferrosilicon was mainly exported to Asian countries (31.5%
of the total), East European countries (22.3%), and CIS countries (18.3%). Among the 35
ferrosilicon-consuming countries the most prominent ones are Turkey (34,400 tonnes),
Russia (18,600 tonnes), Romania (18,400 tonnes), Sweden (15,900 tonnes), and the USA
(9,100 tonnes). These countries together purchased around 57.5% of the ferrosilicon sold
by Ukraine on world markets. In general, mean ferrosilicon export 38% exceeds the figure
registered in the last year’s corresponding period.

Ferrochromium was exported in insignificant quantities (13
tonnes) to Russia only.

In the report period of January-September 2001, Ukraine
exported light ferroalloys to 14 countries representing the CIS, Europe, and North
America. The physical exports of this group of ferroalloys totaled 28,900 tonnes worth USD
17.8 million. Among the exported light ferroalloys were ferronickel, ferrotungsten,
ferrotitanium, ferroniobium, and a number of others. Ferronickel accounted for 71% of the
total exports and ferrotitanium – for 3.8% of all export supplies of light ferroalloys.
Ferronickel was mostly sold to the Netherlands (6,400 tonnes), Germany (3,900 tonnes), and
Estonia (3,300 tonnes). The main consumers of Ukrainian ferrotitamium in the report period
were the Netherlands (800 tonnes) and the USA (160 tonnes).

Import supplies of ferroalloys increased in comparison with
the figures reported in the respective period of the previous year (in the first 8 months
of the current year, ferroalloy imports exceeded the last year’s corresponding figure by
28.1%). Ukraine’s ferroalloy imports from 14 European and Asian countries totaled 37,100
tonnes in January-September 2001 for the sum of USD 38.8 million.

Ferrochromium prevails among the ferroalloys imported by
Ukraine with the share of 50.8%. It is followed by ferrosilicon (31.7% of the total). It
is remarkable that light ferroalloys (ferrosilicochromium, ferromolybdenum, ferrotungsten,
ferrotitanium, ferrovanadium, ferroniobium, ferrophosphorus, and others) together account
for 16.8% of Ukraine’s total ferroalloy imports. The largest quantities were purchased
from Latvia (20,600 tonnes), Russia (6,700 tonnes), and the Netherlands (2,700), which add
up to 80.9% of Ukraine’s total physical ferroalloy imports.

RUSSIA

In the period of 9 months of 2001, ferroalloy production in
the Russian Federation has exhibited a downward tendency. According to data with Interfax
(the State Statistics Committee of the Russian Federation), in the report period,
ferroalloy output curtailed by 9.1% against the figure reported in the same period of the
previous year. We suppose that the prominent decline in the Russian metallurgy was the
main reason for development of this tendency. As it was noted earlier, data with the IISI
indicate that steel production in the Russian Federation reduced to the last year’s
levels during the first 9 months of the current year.

In the nine months of the current year, Russian
ferrochromium production (60% chromium) curtailed to 159,800 tonnes (17,800 tonnes/month),
or +22.8%, whereas that of ferrosilicon (recalculated per 45% silicon content), on the
contrary, added 2.8% reaching 508,100 tonnes (56,500 tonnes/month). Output of
ferrovanadium (38%V) totaled 6,960 tonnes in the report period (770 tonnes/month) and that
of ferromanganese (over 2% carbon content) – 3,770 tonnes (420 tonnes/month).

In September 2001, Russian ferroalloy works produced 57,700
tonnes of ferrosilicon (FS45) against 58,000 tonnes in August and 16,100 tonnes of
ferrochromium (60% Cr) against 16,400 tonnes in August of the current year. Besides, the
country made 853 tonnes of ferrovanadium and 451 tonnes of ferromanganese with the carbon
content of over 2%.

According to information with Interfax, JSC Chelyabinsk
Electrometallurgical Mill curtailed ferroalloy output by 5.8% to the level of 421,480
tonnes during the period of January-September 2001 in comparison with the figure reported
in the last year’s respective period. One of the main reasons for the reduced ferroalloy
sales is high production costs, owing to a raise in energy tariffs, which account for up
to 40% of the cost of ferroalloys. In order to minimize the negative impact of this
factor, JSC Chelyabinsk Electrometallurgical Mill is planning to launch building of its
own gas-turbine power station with the power of 400 MW and the total construction costs of
USD 100 million.

GLOBAL MARKET

The situation on world markets for ferrosilicon was rather
stable in July-August 2001. The European market for ferrosilicon kept the prices for the
75% product at DM/tonne 1,140-1,180 in the indicated period (Table 3). It is remarkable
that the average price exceeds the 2000’ average annual price by approximately 2%,
moreover that steel output by the EU countries curtailed by 1.6% in the 9 months of the
current year in comparison with the figure registered in the respective period of 2000.

The North American market, which is also under the
influence of steel production decline (-11.5%), maintained the June level of prices. In
October, prices for imported 75% ferrosilicon kept at the level of USD/lb 0.30-0.31 ex
storehouse Pittsburgh (USD/tonne 661-683) and those for 50% ferrosilicon вЂ“ at
USD/lb 0.34-0.37 (USD/tonne 750-816).

In August, the workable prices on the Chinese market for
75% ferrosilicon were at USD/tonne 460-470 FOB Chinese ports, which was lower than the
level registered in July. The indicated price limits kept up to October. Price dynamics in
this region indicates a downward tendency, which was brought about by an excess of supply
over demand, notwithstanding the 4.6% growth of steel production in comparison with 9
months of 2000. Reuters supposes that the real prices for ferrosilicon are approaching
USD/tonne 450 FOB Chinese ports. This level provides the minimal demand simultaneously
with the sufficient stockpiled quantities. At the same time, prices for ferrosilicon on
the Chinese domestic market are roughly USD/tonne 24 higher than export prices. However,
some sellers prefer to make quick money on exports rather than higher margins on domestic
trade.

Ferromanganese markets, with the sole exception of the
European market, exhibited downward tendencies in the second half of 2001. The European
market for ferromanganese with the carbon content of 7.5% in January-October kept at the
level of DM/tonne 960-1,000. The American market for ferromanganese with the similar
properties indicated the prices within USD/lt 425-435 in September-October against the
level of USD/lt 460-475 reported at the beginning of the year. The American market for
medium-carbon ferromanganese supported the prices at USD/lb 0.36-0.38 (USD/tonne 794-838)
as compared with USD/lb 0.38-0.40 (USD/tonne 838-882) at the beginning of May.

The level of prices on the Asian market for high-carbon
ferromanganese reached USD/tonne 365-375 FOB Chinese ports in the first ten-day period of
October thus keeping the decline tendency. The comparative basis at the beginning of the
current year was USD/tonne 380-390 FOB Chinese ports.

The situation on the main regional markets for
ferrosilicomanganese, with the exception of the Asian market, has been keeping rather
stable. Prices for this commodity on the European market were at DM/tonne 990-1,020 after
the five-month stability at DM/tonne 980-1,000.

Prices on the American market gradually went up reaching
the level of USD/lb 0.245-0.25 (USD/tonne 540-551) at the end of June. However, at the end
of August, the price range expanded with the low limit going down to USD/lb 0.238
(USD/tonne 525).

Having reached the maximum in March (USD/tonne 415-425 FOB
Chinese ports) the Asian market fluctuated in the following months settling at USD/tonne
395-415 in October. Reuters informs that a representative of China-based Longteng
Ferroalloy believes that if the prices for ferrosilicomanganese keep at around USD/t 390
FOB Chinese ports, this will be a workable level, because the cost price based on FOB
Chinese ports comes to approximately USD/tonne 338. At the same time, this company is
planning to have increased its production capacities by 60,000 tonnes/year by the end of
2001. Proceeding from the present-day situation, experts suppose that the situation on the
markets for ferrosilicomanganese is unlikely to improve sooner than the second half of
2002.

The situation on the global market for ferrochromium did
not alter substantially in September-October 2001. At the beginning of August, after the
March raise to USD/lb Cr 0.32-0.38, the European prices for high-carbon ferrochromium
reduced to USD/lb Cr 0.28-0.30 and remained at this level until October.

Prices for high-carbon ferrochromium in America dropped
from USD/lb Cr 0.35-0.37 to USD/lb Cr 0.29-0.31 to hold at this level until October.

Asian prices for the same commodity reduced from USD/lb Cr
0.31-0.32 to USD/lb Cr 0.27-0.29 during the period of January-May 2001, In the following
months, prices fluctuated within a narrow range again coming to USD/lb Cr 0.27-0.29 in the
middle of August.

Thus, it is possible to state that the global market for
basic ferroalloys is mirroring the general downward tendency, which is mainly caused by a
slowdown in steel production worldwide.

Table 1. Structure of the Ukrainian ferroalloy
market

Table 2. Regional structure of the global steel production in 2001

Table 3. Price situation on the global market for basic ferroalloys

Sources: MBR “Ferro-alloys Monthly”, Metalbulletin.com