Output and exports of Ukrainian tubes stagger on and still trail behind the last year’s levels.

STEEL TUBES

Vitaliy GNATUSH, expert with DerzhZovnishInform

Output and exports of Ukrainian tubes stagger on and still trail behind the last year’s levels.

UKRAINE

The year 1999 is coming to an end, thus it is quite logical to review some preliminary performance results. Unfortunately, it is necessary to outline that performance of the Ukraine’s tube industry is disappointing. According to Metallurgprom association, in January-November 1999, the eight leading Ukrainian tube plants manufactured approximately 1,056 ths. tons of steel tubes or 75% against the output in the respective period of 1998. Exports amounted to approximately 92.6% of the last year’s figure.

The situation in the tube sector hinges on the following reasons:

insufficient volumes of current assets, which calls forth prevalence of tolling transactions;

shortage of hollow sections and strips, most of which are exported beyond Ukraine;

antidumping inquiry carried out by the European Commission;

“frozen” internal market;

turbulent fuel & power market.

Thorough state interventions are the key to egress from this situation. Yet, intensified competition in Russia should be taken into account, as the Russian authorities pursue a policy of import substitution. Western companies launch new lines for tube manufacturing. This means that Ukrainian tube plants are falling more and more behind with their obsolete technologies. The quality of production and its compliance with the ISO standards are becoming more eminent.

Survival of the tube manufacturing and of the whole Ukraine’s mining and smelting complex is in consolidation and coordination of activities. Aggressive policy pursued by the governing bodies to support local manufacturers and to protect their rights on the external markets is vital for building up Ukraine’s potential.

Moreover, it is essential to vigorously “defrost” the domestic market. The primary objectives are the upsurge in construction, mechanical engineering and pipeline transportation. We believe that a round-table meeting of manufacturers, traders, managers and legislators can really facilitate settling of all these issues. Problems must be solved swiftly because prospects for tube manufacturers in 2000 are not defined.

Let’s view the output of steel tubes in Ukraine in greater detail.

According to Metallurgprom association, in the 11 months of 1999, the eight leading Ukrainian tube plants manufactured approximately 1,056 ths. tons of steel tubes or 75% against the output in the respective period of 1998. November 1999 saw production of 85 ths. tons of tubes, which corresponds to some 90% of the October’s output. The average monthly output of steel tubes totaled 96.0 ths. tons as compared to 121.2 ths. tons in 1998 and to 149.8 ths. tons in 1997 (see table 1).

Table 1. Production of steel tubes by Ukrainian plants

Sources: the State Statistics Committee of Ukraine, Metallurgprom association

Traditionally, the leader in production output is Nizhnedneprovsk Tube Rolling Plant, followed by Khartsyzsk Tube Plant and Nikopol Yuzhnotrubny Plant. Based on tube plants’ production performance during the eleven months of 1999, forecasts are made for the total output of steel tubes in 1999 at approximately 1,153-1,173 ths. tons, i.e. 79.3%-80.7% of the last year’s output.

Export reduction supervened the recession in tube production along with inactive internal market.

According to the adjusted data of the Ukraine’s State Customs Service, 710.0 ths. tons of steel tubes worth USD 273.1 mln. were exported from Ukraine during the 11 months of 1999. Out of these exports, seamless tubes made up 60.5% (as compared to 57.9% registered in 1998), large-diameter welded tubes – 17.6% (and 18.1% in 1998) and other welded tubes – 22.9% (and 24.0% in 1998).

Exports of Ukrainian-made steel tubes during the 11 months of 1999 corresponded to 92.6% of export volumes in the respective period of 1998. Accordingly, average exports dropped from 69.7 ths. tons per month in 1998 to 64.5 ths. tons per month in 1999 (see figure 1 below). The last three months (September-November) encountered the perpetual export decrease.

Figure 1. Exports of steel tubes from Ukraine in 1998 and 1999

Traditionally, the largest quantities of steel tubes were supplied to CIS countries (70.8% of the total), Asian countries (11.8%), EU member-states (10.5%), Eastern European countries (3.1%) and the Baltic States (2.3%) (see table 2 below). In 1999, the ratio of tube exports to the CIS ominously increased, while the ratio of tube exports to the other regions of the world kept on going down. Evaluating the lessons of 1998 and considering the industrial development in Russia, this tendency truly cautions.

Table 2. Ukrainian exports of steel tubes in 1997-1999, ths. tons

Russia was the unrivaled leader in imports of Ukrainian tubes and consumed 379.6 ths. tons or 53.4% of the total exports during the period under review. In tube exports to Russia, seamless tubes made up 55.6% of the total, other welded tubes – 25.6% and large-diameter welded tubes – 18.8%. The subsequent largest importers of Ukrainian-made tubes were Uzbekistan (52.8 ths. tons), Turkey (44.2 ths. tons) and Italy (34.7 ths. tons).

Seamless tubes

In the 11 months of 1999, Russia was the leading importer of Ukrainian seamless tubes (211.0 ths. tons or 49.1% of the total exports of seamless tubes from Ukraine). Besides, the main importers of Ukrainian seamless tubes were Turkey (41.0 ths. tons), Italy (33.1 ths. tons), Germany (26.3 ths. tons) and Israel (17.4 ths. tons). Global export distribution by regions reveals the following top three regions: CIS countries (consuming 59.8% of the total Ukrainian exports of seamless tubes), Asia (17.8%) and the European Union (14.3%).

In January-November 1999, Russia boosted imports of Ukrainian seamless tubes as high as some 1.3 times against the respective period of 1998 (see figure 2). However, during January-August 1999, exports increased and upon reaching their peak (at 29.6 ths. tons) went down and, according to the latest data, decreased to 17.8 ths. tons in November.

Figure 2. Ukrainian exports of steel tubes to Russia in 1998-1999

Large-diameter welded tubes

The situation on this market has remained rather tense for Ukraine. During the 11 months of 1999, exports of this commodity barely indicated 124.8 ths. tons or 89.8% of the last year’s level. Out of the total exports of Ukrainian large-diameter welded tubes, the largest supplies were bound to Russia (51.0% of the total) and Uzbekistan (30.8%). The lowest exports to Russia were registered in January 1999 (0.2 ths. tons) and the largest – in September 1999 (20.7 ths. tons).

Other welded tubes

Altogether in 1999, some 155.8 ths. tons of other welded tubes were exported beyond Ukraine. Approximately 83.4% of these were forwarded to CIS countries, including some 62.4% – to Russia. However, this corresponds to only some 89% of the last year’s results or 97.3 ths. tons. Nevertheless, the year 1999 witnessed a gradual increase in average monthly exports to Russia from 1.6 ths. tons (in January) all the way up to 15.0 ths. tons (in September), i.e. as high as ninefold (see figure 2 above). Out of the other regions, which imported large quantities of Ukrainian welded tubes, the most prominent ones were EU states – 7.1% of the total Ukrainian exports and the Baltic States – 4.2%. Among EU member-states, the largest supplies of other welded tubes were bound to Greece (3.9 ths. tons) and Ireland (2.6 ths. tons). There were still no supplies of Ukrainian-made other welded tubes to African and South American markets. Summarizing the data on output, exports and imports of steel tubes in January-November 1999 and in 1997-1998 (see table 3 below), one can notice the extremely uncertain situation on the Ukrainian market for steel tubes.

Table 3. Ukrainian market for steel tubes in 1997-1999, ths. tons

* – data for the 9 months of 1999

Considering all the above-mentioned, one can anticipate production and exports of Ukrainian steel tubes in the first quarter of 2000 to be about the same as in the fourth quarter of 1999.

USA

In May-November 1999 the US market for oil tubes featured a pronounced positive trend. While in May-July 1999 average prices for all the types of oil tubes fluctuated within the range of +/-(0.1-0.6)%; in November the prices rose by approximately 6.8% (see table 4).

Table 4.Average monthly prices for oil tubes on the US domestic market (in Houston area) in 1999, USD per MT

Source: OJSC CherMetInformatsiya Bulletin

The average monthly prices for production tubing and electric-welded tubes increased by 7.1%; for seamless (made of carbon steel) – by 5%, for grade #80 seamless tubes – by 10%; for casing electric-welded tubes – by 6.5%; for seamless tubes made of carbon steel – by 4.7% and for grade #80 seamless casing tubes – by 6.8%.