The Ukrainian Association of Metal Scrap (UAMS) was founded by enterprises, which trade in metal scrap, in order to consolidate efforts and protect their interests.
THE UKRAINIAN ASSOCIATION OF METAL SCRAP
The Ukrainian Association of Metal Scrap (UAMS) was founded by enterprises, which trade in metal scrap, in order to consolidate efforts and protect their interests.
On April 2, 1999, at the founders’ meeting, representatives of 50 enterprises that deal with scrap made a decision to incorporate into a single association. At that time, the Ukrainian metallurgy was represented by the active Ukrainian League of Industrialists and Entrepreneurs, the Ukrainian Association of Ferrous Metallurgical Enterprises, the Council of Manufacturers and Exporters of Ferrous Metals, etc. As of June 2000, the UAMS comprised over 100 companies that held 75-80% of the total operations on the Ukrainian scrap market.
Thus, establishment of the UAMS has become the logical extension of the process of self-regulation and market adjustments in the economy of independent Ukraine. Besides, it serves as an example of various forms of entrepreneurs’ consolidation (these are quite traditional worldwide), which bring order to entrepreneurial activities within the country and to relations with the state institutions, as well as regulate activities of their members on domestic and foreign markets.
The UAMS has been founded as a non-state-owned, non-commercial, and non-profit-making association of enterprises to deal with the following issues:
- representative functions, lobbying and protection of its members’ interests in central and local legislative and executive bodies;
- coordination of activities of enterprises that trade in scrap on internal and foreign markets;
- participation in development and expertise of drafts of laws, by-laws, and other acts, state programs for regulation of transactions in scrap;
- facilitation of arrangement of feedstock supplies to Ukraine’s metallurgical mills;
- assistance in improvement of the country’s environment (maturing both the technology of procurement and processing of scrap and control system over environmental safety of scrap on all the processing stages);
- establishment of conditions to develop and enhance technical level and efficiency of activities, as well as competitiveness of Ukrainian enterprises engaged in scrap business;
- facilitation of creation of a system to monitor domestic and foreign scrap markets and regularly feed business information to its members.
The Association takes part in scientific and business communication both inside the country and on the international level, notably, via direct participation in sectoral coordination meetings, conferences, symposia, exhibitions, as well as by making use of the mass media.
The Association intends to consolidate financial and business potential of its members to develop infrastructure and properly equip river and sea ports of Ukraine that handle scrap with aim to increase their handling capacity and lower the cost of services; to mature the existing deficient and costly system of double-stage control over radioactivity of exportable scrap, etc.
Scrap market in Ukraine
By the middle of 1999, the total production in the field of operations with metal scrap equaled some UAH 3.5 billion (USD 870 million), which exceeded the overall production in such sectors as light industry, woodworking, electric technical industry, aerospace, radio-electronics, instrument engineering, and agricultural machine-building. According to preliminary estimates, the scrap business employs some 120,000-140,000 people.
By the mid-90s, when Ukraine’s steel production decreased as low as 2.5 times and scrap export was exempted from all the restrictions, procurement of ferrous scrap in Ukraine hit its low of slightly over 3 mln. tonnes. Besides, export supplies accounted for about 6.3% of this volume. In the 5 subsequent years, due to wide spread between internal and external prices for metal scrap and extremely poor financial health of Ukrainian metallurgical works, production of scrap increased 3 times, mostly due to export expansion from 200,000 tonnes in 1995 to 4.7 mln. tonnes in 1999.
Analysis of iron and steel exports shows that in 1999 overall sales of ferrous, iron and, semis scrap and refuse accounted for 53.9% of the whole physical exports and 39.8% of the total revenues from ferrous metal exports beyond Ukraine. Notably, percentage of scrap respectively indicated 15.8% and 7.9%. Results of the 4 months of 2000 have confirmed this trend and export of raw materials and semis accounted for 54.3% of physical export and yielded 39.7% of export revenues, with scrap respectively making up 15.1% and 7.3%. In the 4 months of 2000 physical export of ferrous scrap and refuse increased by nearly 3.5% against the respective 1999 figure.
Change of the situation on the world steel markets that started back in the middle of 1999, improvement of financial opportunities of metallurgical mills, devaluation of the national currency, as well as active performance of the UAMS have ensured an increase in scrap supplies to metallurgical mills of Ukraine. While in 1995-1999 volume of scrap purchased by metallurgists increased from 2.84 mln. tonnes to 4 mln. tonnes (up by 40.8%), in the 5 months of 2000 metallurgical mills purchased 2.34 mln. tons, which is 77.5% greater than it was supplied to metallurgical works in the 5 months of 1999. Thus, the ratio of scrap procured within the country over total steel output increased from 131 kg/tonne to 185 kg per tonne of steel from 1995 till the beginning of 2000 (taking into account the fact that about a half of Ukrainian steel is produced in open-hearth furnaces). According to calculations made by the State Committee for Industrial Policy of Ukraine jointly with the UAMS, in 2000, output of steel is planned at 27.5 mln. tonnes and demand of metallurgical mills for domestic scrap will come to some 5.035 mln. tonnes. Some more 5.0 mln. tonnes of scrap are accumulated during the manufacturing process of these enterprises.
Such a change of events on the Ukrainian market for scrap has become possible as a result of UAMS’s coordination of cooperation between the buyers and the suppliers of scrap without any part of the state bodies.
Out of the total produced and processed scrap on the Ukrainian market, export made up over 6.3% in 1995, 40.5% in 1997, 48.5% in 1998, and 54.6% in 1999. According to preliminary estimates, in the first 4 months of 2000 the situation changed for the better and domestic consumers purchased some 58% of scrap procured in the country.
Such a procurement over export ratio for scrap does not exist in any country with the developed ferrous metallurgy. In Russia, this figure comes to 40-42%, in UK to slightly over 30%, in Germany and France to some 25%, and in Central and Eastern Europe to 15%. Taking into account the fact that export of ferrous metals from Ukraine brings in nearly 40% of all the export revenues, the UAMS stands for both sound approach to planning of scrap exports and to creation and support of competitive conditions for scrap purchases on the domestic Ukrainian market by local mills.
The UAMS votes for retention of rights and freedoms of scrap business, and against illegal intrusion of local authorities in this field, against decentralization of licensing in this business, against intention to monopolize the scrap market registered in selected regions of the country, and against unfairly high railroad fares for transportation of metal scrap via the territory of Ukraine.
It is worth mentioning that we are open to contacts and cooperation with the state institutions, analytical centers, and commercial structures that are more or less related to the market for metal scrap.