FERROALLOYS

Vitaly GNATUSH, expert with DerzhZovnishInform

Ukraine

Despite the reasonably tough state of affairs in the Ukrainian economy, analysis of the current domestic production, consumption, and export of ferroalloys arms with certain optimism. The figures in table 1 evidence that the Ukrainian ferroalloy manufacturers did well in the first quarter of 2000 and have rather promising outlooks.

All the more, the global economy featured auspicious trends in the five opening months of 2000 helped by steel output growth in numerous regions worldwide. The growth rates ranged from 0.2% in Australia to 22.6% in the CIS against the respective period of 1999, except for Oceania with -0.3%. In total, the IISI reported that 63 countries of the world boosted their steel outputs by 11.0% in the 5 months of 2000 compared to the 5 months of 1999.

According to the data with Metallurgprom association, in January-May 2000 the Ukrainian ferroalloy manufacturers, viz. Nikopol, Zaporozhye, and Stakhanov Ferroalloy Works, produced some 507,000 tonnes of ferroalloys (see table 2 for details), that is +28% against the respective 1999 period.

On the whole, regardless the rather insecure situation in the Ukraine’s power industry, ferroalloy manufacturers steadily expanded their production during the period under review. However, June saw a further narrowing of electric power supplies to mining companies and metallurgical mills of Ukraine. The information extracted from the Ukrainian News newspaper (Ukrayinski novyny) drives to a forecast of a 20 to 30% decrease in ferroalloy outputs at Nikopol Ferroalloy Works and a 10 to 12% decrease at Stakhanov Ferroalloy Works. According to the data with the Ministry of Fuel and Power of Ukraine, thermal electric power stations have slashed generation of electric power by 20-25% since June 2000 due to smaller natural gas supplies (24-30% down), shortage of fuel oil stocks, and narrowed application of coal. Besides, low water inflow on the Dnieper river has caused plummeting generation of electricity at hydroelectric power stations. As of June 13, shortage of electric power in Ukraine came to 50 million kWh, and the country was 2,500-2,800 MW short on the current power (i.e. 7-12% of the total consumption was not covered). Coming from the necessity to build up winter fuel stocks, supposedly, in the coming three months supply of electric power to consumers will stay at the June 2000 level.

Apparently, such a situation will slightly calm down the disquietude of Western companies as regards greater outputs and exports of Ukrainian industrial factories. Thus, competition on the European market for ferroalloys may intensify, and Ukrainian manufacturers should initiate a bill defining obligations of the State as to protection of domestic producers on the global market.

Table 1. Ukrainian ferroalloy market

Table 2. Ferroalloy output in Ukraine in 1999-2000

Source: Metallurgprom assn.

According to the latest data with the State Customs Service, Ukraine exported some 309,600 tonnes of ferroalloys worth $130.7 million in January-May 2000. It should be mentioned that this year’s physical ferroalloy exports have soared 46.8% against the respective period of 1999 and +8.2% against August-December 1999 (see figure 1).

Besides, in January 1999 – May 2000, average exports gained approximately 10% per month. Such figures witness a definite stability of this business in Ukraine, as well as a maturity of the ferroalloy export mechanisms.

The product mix of exportable ferroalloys is quite diverse and comprises 11 major items in compliance with the Commodity Nomenclature of Foreign Economic Activities.

Manganese ferroalloys account for some 78.9% of Ukraine’s total ferroalloy exports, including ferrosilicomanganese with 54.0% and ferromanganese with 24.9%. Ferrosilicon supplies add about 19.3% to the total.

The by-region distribution of Ukrainian ferroalloys is rather extensive. 30 countries from 4 continents consume Ukrainian ferroalloys. Only South America, Australia, and Oceania are out of this list.

The export distribution pattern shows that CIS member-states (with 49.3% of the total) are the main consumers of Ukrainian ferroalloys (see table 3). Asia ranks the second biggest consumer with 25.9%, followed by Eastern European states with 12.5%. The Russian Fed steadily holds the leadership among CIS states with imports of roughly 131,900 tonnes of Ukrainian ferroalloys in the 5 months of 2000, including 70,900 tonnes of ferrosilicomanganese, 58,700 tonnes of ferromanganese, and some 1,700 tonnes of ferrosilicon. On the whole, despite certain local slumps, export of manganese ferroalloys to Russia shows favorable behavior (see figure 2).

Table 3. Ferroalloy exports from Ukraine in 1999-2000 (‘000 tonnes)

In January-May 2000 silicomanganese export to Russia increased as high as 1.9 times, while ferromanganese exports gained nearly 2.7 times against the respective period of 1999. At the same time, export of ferrosilicon increased as high as 1.3 times in the period under review.

The Ukrainians keep presence on the South Korean ferroalloy market (17,600 tonnes exported) and Turkey (50,600 tonnes). Silicomanganese makes up 66.8% and ferrosilicon 33.2% of Ukrainian ferroalloy supplies bound to Asia.

East European countries consumed 12.5% of ferroalloy exports beyond Ukraine, of which ferrosilicon accounted for 48.8%, silicomanganese for 25.0%, and ferromanganese for some 26.2%.

In the first five months of 2000 export pattern of Ukrainian ferroalloys somewhat differed from that in 1999 (see table 4). Against the year before, the share of ferrosilicomanganese plummeted as low as 1.06 times, while the share of ferromanganese grew 1.2 times.

This year ferrosilicomanganese has been forwarded to 20 countries. Mostly, it was supplied to the CIS (46.5% of the total) and Asia (31.9%). The main consumers are Russia (70,900 tonnes), Turkey (34,400 tonnes), South Korea (17,600 tonnes), and Poland (5,900 tonnes). It should be mentioned that average monthly exports of ferrosilicomanganese exceed the last year’s level by some 17%.

Ferromanganese has been mainly dispatched to the CIS (86.5% of the total) and Eastern Europe (13.2%). Russia is the first among these consumers with 58,800 tonnes or 76.2% of the total ferromanganese. Romania (8,000 tonnes) and Kazakhstan (some 5,400 tonnes) lag far behind. Average monthly exports of ferromanganese have doubled compared to the year 1999.

Ferrosilicon has been exported to Asia (44.4% of the total) and East Europe (31.6%). The biggest consumers were Turkey (16,200 tonnes), Slovakia, and the USA (some 4,300 tonnes each). As to the CIS consumers, Belarus purchased 4,000 tonnes of Ukrainian ferrosilicon and Russia acquired 1,700 tonnes. On the whole, average monthly exports of ferrosilicon outrun the last year’s level by 17%.

There were a few small export shipments of ferrochromium bound to Russia (8.2 tonnes).

Ukrainian-made ferronickel (4,300 tonnes), ferrotitanium (800 tonnes), and ferromolybdenum (50 tonnes) were in hot demand among exportable lightweight ferroalloys. In the five months of 2000 Ukraine exported its light ferroalloys to 10 countries of the world.

Out of the total of 5,200 tonnes of light ferroalloys exported, the greatest export supplies involved ferronickel (81.4% of the total) and ferrotitanium (16.4%). Ferronickel was primarily supplied to EU member-countries (some 2,100 tonnes or 49.1%) and the Baltic States (some 2,200 tonnes or 50.6%). The main individual consumers of ferronickel are Germany (1,800 tonnes) and Estonia (1,900 tonnes). Ferrotitanium was predominantly exported to Russia (400 tonnes), the Netherlands (140 tonnes), and the USA (100 tonnes), which makes up 77.9% of the total ferrotitanium supplies.

In the five months of the present year Ukraine imported some 13,600 tonnes of ferroalloys spending $13.0 million.

Table 4. Pattern of Ukrainian ferroalloy exports (% of the total)

In the period under review, 14 countries supplied ferroalloys to Ukraine, namely, Belgium, Estonia, Germany, Georgia, Hungary, Kazakhstan, Latvia, Macedonia, the Netherlands, Russia, Singapore, Slovakia, Slovenia, and Sweden.

The largest shipments were imported from Latvia (some 8,300 tonnes), Russia (2,100 tonnes), Georgia (1,400 tonnes), Germany, and the Netherlands (500 tonnes each). Ferrochromium (8,000 tonnes or 58.9% of the total) was the main commodity on the list of Ukrainian ferroalloy imports, with ferrosilicon coming the second with 2,500 tonnes or 18.1%. Light ferroalloys, such as ferromolybdenum, ferrotungsten, ferrotitanium, ferrovanadium, ferroniobium, ferrophosphorus, etc., accounted for 1,432.1 tonnes or 10.5% of the total import. Average monthly imports of lightweight ferroalloys equaled some 280 tonnes.

Global market

In January-May 2000 the world market for base ferroalloys was rather quiet (see table 5), and quotation are not expected to increase in the period of summer vacations.

The American market for silicomanganese keeps up the high prices outpacing the 1999 rates by some 17%. As of the second decade of May, the price for silicomanganese was $/tonne 551-573 ex-warehouse Pittsburgh. During this period, the European prices steadily imitated those American and increased by nearly 25% against the average 1999 price. Starting from mid-March 2000, silicomanganese price at this market was stable and settled at DM/t 990-1,020. In March-May, the Asian silicomananese market maintained the price of $/t 385-395 FOB, being under pressure of Chinese manufacturers.

A rather dynamic situation was observed on the ferromanganese market in January-May. Since March 2000, the European market for 7.5%-carbon ferromanganese has reported a price of DM/t 860-900. Against 1999, the prices have gained about 23%. Over this period, the American prices for high-carbon ferromanganese increased by some 5 to 8% against the year 1999 all the way to $/lt 475-495.

Table 5. Average world prices for base ferroalloys

Sources: MBR Ferro-alloys Monthly, Metal Bulletin

In the four opening months the European prices for ferrosilicon kept on slowly drifting downwards and settled at DM/t 1,100-1,150 in the second decade of May against the average January price of DM/t 1,200. This is an insignificant decrease compared to 1999 and it does not exceed 1%. The US market for import ferrosilicon saw rather stable prices that stuck to $/lb. 0.36-0.38 at the beginning of April against the 1999 average of $/lb. 0.40.

The ferrochromium market has been rather active this year. Demands of stainless steel manufacturers constantly heat up the prices for ferrochromium. At the European market the prices for high-carbon ferrochromium exceeded the 1999 average by $0.03 per lb. Cr and settled at $0.37-0.41 per lb. Cr. Reportedly, South African manufacturers managed raising prices for supplies scheduled the second quarter 2001 by $0.45 per lb. Cr. The ferrochromium demand is strong, though there is an oversupply on the world market. Manufacturers from Kazakhstan, India, and Iran withhold their ferroalloys waiting for price recovery. At the same time, growth of ferrochromium prices is held back by significant stocks accumulated back in 1999, when the prices were lower.

The world market for light ferroalloys in 2000 was ambiguous, though a number of trends can easily be traced (see table 6).

The market for ferrotitanium is the most dynamic place. Against the average price of 1999, the price for 70% ferrotitanium increased as high as 1.6 times in January 2000. The prices dropped to $3.80-3.90 per kg Ti in May, though even these rates were some 30% higher than in 1999.

The European market for ferrovanadium features volatility, though the trends have been rather favorable in 2000. During the period under review, the high of ferrovanadium prices was registered in March, with the average high and low equaling $12.58 and $13.20 per kg V respectively. Further on, ferrovanadium prices avalanched to $10.60-11.30 per kg V in the second decade of 2000. After a markdown in January 2000 ($4.3 per lb. V), the US market gradually, but rather steadily stimulates a decrease in prices by a monthly average of $0.3-0.4 per pound V.

Table 6. Average prices at the world market for light ferroalloys

Sources: MBR Ferro-alloys Monthly, Metal Bulletin.

The world ferrotungsten market is rather stable in the present year. The European prices have settled at $5.60-5.80 per kg W, with an average being some 3% lower than the same 1999 figure. The Asian market for ferrotungsten also features envious stability.

The global market for ferromolybdenum is presently the firmest among the light ferroalloy markets. As of the second decade of May, the prices for 65-70% Mo ferromolybdenum were $7.00-7.15 per kg Mo, and price for 60% Mo equaled $6.60-6.70 per kg Mo. The present average prices are nearly 5% different from the level of 1999. The same situation is observed at the US market for ferromolybdenum. All this proves a firm balance of supply, demand, and production.

All these events on the light ferroalloy markets show stability and favorable short-term outlooks for the global application of alloy steels in rail-making, thermal power equipment, motor-building, and other important industries.

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