Ukraine is slowly drifting towards production, consumption, and export of high-tech products instead of exports of raw materials and semi-finished products.

NONFERROUS METALS

Vyacheslav POPOV, expert with DerzhZovnishInform

Ukraine is slowly drifting towards production, consumption, and export of high-tech products instead of exports of raw materials and semi-finished products.

GLOBAL MARKET

Aluminum

The seasonal summer factor has failed to hold back aluminum prices. After a slump in April 2000, prices for aluminum began to go up again in May and June owing to improved situation on the major markets worldwide.

In May, average LME prices added US$/tonne 10 against the April figure, thus reaching US$/tonne 1,467.19. Aluminum quotations in May fluctuated between US$/t 1,430.5 and US$/t 1,514.5.

The June augmentation of aluminum prices was more prominent. Compared to May, average price for aluminum gained nearly US$/tonne 40 coming to US$/t 1,506.73. Aluminum prices ranged between US$/t 1,419.5 and US$/t 1,579.5.

As a result of increased market activity in July 2000, a US$/tonne 57 increase in aluminum price was registered, thus pushing the price up to US$/t 1,563.88. The low and the high July prices for aluminum were US$/t 1,541 and US$/t 1,599 respectively. It is remarkable that the high was a new record for the latest four months.

Prices for A380.1 aluminum alloy nearly mirrored the aluminum prices in this period. In May, prices for this aluminum alloy increased nearly US$/tonne 10 against April, just as in case with aluminum. The May price for aluminum alloy amounted to US$/tonne 1,183.43, while the April price was US$/t 1,172.94. Average price for the alloy came to US$/t 1,191.75 in June. The corridor of price fluctuations in May was US$/t 1,155-1,200. In June, the low and the high somewhat increased to US$/t 1,121-1,238.

The July price growth could not but affect the prices for aluminum alloys. Average July price for this commodity amounted to US$/tonne 1,225.1, nearly US$/t 35 higher than the previous month’s figure. Prices for the aluminum alloy fluctuated between US$/t 1,204 and US$/t 1,245 that month.

In May-June 2000, premiums for aluminum of the CIS origin in Rotterdam were as follows:

US$/tonne 20-25 for A5 aluminum;

US$/tonne 25-30 for A6 aluminum in May and US$/tonne 30-35 in June;

US$/tonne 33-35 for A7 aluminum in May and US$/tonne 35-40 in June.

Concerning the general conclusions on the aluminum market, the preliminary estimates calculated at the end of the second quarter imply that the average LME price for aluminum equaled US$/tonne 1,462 in the second quarter of 2000, almost US$/t 180 lower than the US$/t 1,640 reported in the first quarter of the year. The second-quarter price drop was caused, first of all, by low interest in this metal from the side of investment funds, greater aluminum output worldwide, traders’ and speculators’ indifference to depletion of aluminum stocks in the LME warehouses, and somewhat of a market equilibrium.

In addition, alumina price, which topped out in March-April 2000 climbing to US$/t 420-440, also went down to US$/t 280-300 in late July. Augmented output of this raw material accompanied the price drop.

Aluminum stocks in the LME lowered as a result of delay in supplies from the Russian Federation, which, in turn, was caused by restructuring of the Russian aluminum industry. This event was most significant for Japan, because this country is the main importer of Russian-made aluminum. Premiums for Russian aluminum remained rather high on the Japanese market in May-June, reaching US$/t 55-60 CIF Japanese ports.

Temporary shortage of Russian aluminum on the US market added fuel to greater demand for aluminum and the premiums.

Table 1. LME aluminum quotations in 1998-2000 (January-July), in US$ per tonne

* — hereinafter prices in futures contracts stipulate for supplies in three months.

Outlooks

Experts believe that shortage of aluminum may total 500,000 tonnes in 2001. It is forecast that consumption of aluminum will add 5% this year and another 2.6% in 2001. The 2001 prices for aluminum may reach US$/tonne 1,650-1,750.

Table 2. Average LME aluminum prices in 1995-2000 (January-July), in US$/t

Table 3. Average LME prices for А380.1 aluminum alloy in 1995-2000 (January-July), in US$/t

Table 4. LME quotations of А380.1 aluminum alloy in 1998-2000 (January-July), in US$/t

Table 5. Dynamics of LME aluminum prices in 1998-2000 (January-July), in US$/t

Table 6. Dynamics of LME prices for А380.1 aluminum alloy in 1998-2000 (January-July), in US$/t

* — hereinafter prices in futures contracts stipulate for supplies in three months.

Copper

In May 2000, prices for copper grew significantly against the previous month. After a more than US$/tonne 60 drop of copper prices in April, a new upswing of market activity in May led to a US$/tonne 107 increase in prices. Thus, the average May price for this metal reached US$/t 1,785.62. For comparison, the corresponding April figure was US$/t 1,678.75. Throughout May, copper price floated between US$/tonne 1,719.0-1,829.0.

In June, LME prices for copper somewhat decreased, and the average plunged to US$/t 1,753.18. The copper price fluctuation limits were US$/t 1,707.00-1,794.50 in June 2000.

Just as the aluminum market, the market for copper became more active in July, giving a power jolt to prices. The average July price for copper came to US$/tonne 1,799.36. Copper quotations kept within US$/t 1,741-1,963.

The end of spring and the beginning of summer turned out to be a nice period for the copper market. Copper stocks in LME warehouses continued reducing mainly owing to the measures taken by the Indonesian government to lower copper output in the second largest copper mine Grasberg as well as production decline in Freeport copper mine.

However, Chile, one of the primary producers of copper and copper materials, augmented its output of copper concentrate. Production of this commodity gained 6.2% over the first four months of 2000 against the corresponding 1999’ period. This factor’s influence on the market was tempered by the June strike at Quebrada Blanca mine, which makes 75,000 tonnes of copper concentrate per year.

China, one of the key copper importers, is in the spotlight now. Experts with Macquarie Equities suppose that China’s copper imports may reduce significantly in the second half of 2000, thus causing a surplus of this metal on the market. According to the Chinese State-owned company China Metals, China’s import of copper has increased weightily and copper demand has strengthened.

China’s imports of refined copper totaled 274,200 tonnes in the first half of 2000, 45.2% up from the 1999 corresponding figure. Experts with Macquarie estimate Chinese copper imports at 175,000 tonnes in the second half of 2000.

Table 7. LME copper quotations in 1998-2000 (January-July), in US$/t

Table 8. Dynamics of LME copper prices in 1998-2000 (January-July), in US$/t

* — hereinafter prices in futures contracts stipulate for supplies in three months.

Table 9. Average LME copper prices in 1995-2000 (January-July), in US$/t

UKRAINE

Foreign trade

The results of the first half of 2000 show that Ukraine exported totaled 341,900 tonnes of nonferrous metals and their products worth US$350.5 million, 34.18% and 34.672% respectively greater than in the first half of 1999 (i.e. 254,800 tonnes and US$260.2 million).

The share of copper and aluminum products in total physical exports of nonferrous metals from Ukraine reached 90.38% in January-July 2000, and that in the total revenues yielded by nonferrous exports came to 90.19%. Such figures, which clearly show how important these commodities are for Ukraine’s nonferrous exports, have been observed for already a great number of months.

In the first half of 2000, export of copper and aluminum-based commodities exceeded the January-June 1999 figures in terms of both physical exports and export revenues by 34.74% and 35.99% respectively.

Aggregate exports of nickel, lead, and zinc in the first half 2000 amounted to 4,628.2 tonnes worth US$1,458,400, i.e. 1.35% of the total physical exports and 0.42% of export revenues from total nonferrous exports. To compare, the corresponding figures reported in January-June 1999 totaled 3,586.42 tonnes and US$1,955,930.

Exports of other nonferrous metals, cermets, and their products continued augmenting. In January-June 1999, some 16,879 tonnes of these commodities were exported bringing in US$13.882 million, whereas in the respective period of 2000, these figures went up to 21,979 tonnes and US$19.699 million. This means that in 2000, the two figures have added 30.21% and 41.90% respectively. The shares of these commodities in the total nonferrous exports in terms of physical quantity and export revenues were 6.43% and 5.62% respective during this period.

Copper

Over January-June 2000, 75,670 tonnes of copper commodities worth US$73.14 million were exported beyond Ukraine. Compared to the corresponding period of 1999, the two figures have added 18.36% and 8.20% respectively this year.

As regards selected export articles within the copper group, the most prominent ones were, just as before, the unrefined copper in ingots, refined copper and copper-based alloys, as well as copper and copper-alloy scrap.

In the first half of 2000, export of refined copper and copper alloys brought in US$31.49 million or 43.05% of the total revenues from Ukraine’s copper exports.

Analysis of the export pattern indicates that augmented exports of this group’s commodities remain remarkable owing to the ban on nonferrous scrap exports and the resulting processing of copper and copper-alloy scrap. In the first half of 2000, export of these products amounted to 576.37% in terms of physical supplies and 668.83% in terms of export revenues against 1999.

Just a little bit behind refined copper and its alloys, there stands another export article of the copper group, namely, copper and copper-alloy scrap and waste, which continue being supplied abroad as tolling. Export of this scrap and waste yielded US$29.4 million or 40.2% of the total copper exports from Ukraine. Compared to January-June 1999, physical export of these products reduced 26.22%, while export revenues plunged 40.67%.

Table 10. Exports of nonferrous metals and nonferrous products in the first half of 1999-2000

Aluminum

Like before, the aluminum group prevails in Ukraine’s aggregate nonferrous exports. The physical share of this group share reached 68.24% of the total in the first half of 2000, while its export brought in 69.33% of the total nonferrous export revenues.

Ukraine exported 233,290 tonnes of aluminum products (+41.08% against the first half of 1999) worth US$243 million (+47.38%) in the first half of 2000.

Primary aluminum and pigged aluminum alloys remain the key export articles within this group accounting for 83.93% of the total aluminum-group exports. Altogether, Ukraine exports 192,820 tonnes of these articles earning US$203.95 million.

The second largest aluminum-group export article is aluminum and aluminum-alloy scrap, which is primarily exported through tolling. Export prices for secondary aluminum alloys changed by some US$/tonne 10-20 in June. By the end of the month, prices changed back to the rates reported at the beginning of June. In late June 2000, Ukraine exported AK5M2 alloys at US$/tonne 1,000-1,050 FCA and AV-87 alloys at US$/t 930-970 FCA. Export of this commodity over the first 6 months of 2000 totaled 33,450 tonnes worth US$25.44 million, or 130.7% and 108.9% respectively of the last year’s corresponding figures.

Distinctive features of export supplies

In the first half of 2000, the following commodities accounted for the bulk of Ukrainian nonferrous exports:

unrefined aluminum and aluminum alloys with 192,800 tonnes (56.40% of the total) worth US$203.95 million (58.18%);

copper scrap and waste with 36,840 tonnes (10.78%) worth US$11.74 million (8.39%);

aluminum scrap and waste with 33,450 tonnes (9.78%) worth US$25.44 million (7.26%).

Table 11. Main articles of Ukrainian exports of copper and copper products in the first half of 1999-2000

Table 12. Geographical distribution of Ukrainian exports of copper and copper products in the first half of 2000

Table 13. Main articles of Ukrainian exports of aluminum and aluminum products in the first half of 1999-2000

Regional distribution of export supplies

Geographical structure of copper exports was rather stable in January-June 2000. Germany remains the most significant importer of copper commodities from Ukraine with 55,000 tonnes (72.68% of all the copper-group commodities) for the sum of US$53.9 million (73.68%). Belgium is second to Germany and far behind it with 4,130 tonnes worth US$3.74 million (5.45% and 5.12% respectively). Russia tanks the third with 1,880 tonnes costing US$3.04 million (2.49% and 4.16%), while Italy goes fourth with 2,500 tonnes worth US$2.36 million (3.3% and 3.23% respectively).

The primary importers of Ukraine’s aluminum-group commodities are the USA with 44,210 tonnes worth US$38.4 million (18.95% and 15.80% of the total respectively); followed by Italy with 35,200 tonnes worth US$36.16 million (15.09% and 14.88%); the Russian Federation with 31,850 tonnes worth US$49.27 million (13.66% and 20.28%); Latvia with 25,160 tonnes worth US$13.48 million (10.78% and 5.55%); Germany with 20,980 tonnes worth US$19.72 million (8.99% and 8.11%); and Hungary with 19,810 tonnes worth almost US$27.55 million (8.49% and 11.34% correspondingly).

CONCLUSIONS

It is difficult to make some significant conclusions, when the situation does not evolve in any remarkable way.

It looks like the pattern of Ukraine’s nonferrous exports has not changed for years. In other words, semi-finished products prevail in nonferrous export from Ukraine. However, there is always a hope for the better, all the more that such leading Ukrainian nonferrous smelters as Zaporozhye Aluminum Smelter (Zaporizky vyrobnychy alyuminiyevy kombinat) and Artyomovsk Nonferrous Metalworking Plant (Artyomovsky zavod po obrobtsi kolyorovykh metalliv) do their best to turn semis into exportable end products, which will find their buyers provided proper marketing strategy.

Table 14. Geographical distribution of Ukrainian exports of aluminum and aluminum products in the first half of 2000

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