Aluminum articles firmly hold the leadership in nonferrous exports in the 1st quarter of 2000.

NONFERROUS METALS

Vyacheslav POPOV, expert with DerzhZovnishInform

Aluminum articles firmly hold the leadership in nonferrous exports in the 1st quarter of 2000.

GLOBAL MARKET

Aluminum

Situation on the aluminum market remained rather stable in March, although certain events discussed below could not but impact the market.

The average level of LME quotations for aluminum went USD/tonne 100 down against the month-before figure to USD/t 1,577.41 (the February figure was USD/t 1,670.67). LME quotations for aluminum ranged within USD/t 1,523.0 and USD/t 1,601.0 with the low registered on the last day of the month, thus indicating that the downward price tendency may proceed in April.

Unlike in the previous month, reduction in prices for A380.1 aluminum alloy was less than that in aluminum prices. A USD/t 72 reduction of A380.1 alloy price was registered. This product was priced USD/t 1,347.43 in February, whereas the March price came to USD/t 1,275.83. A380.1 alloy quotations floated within the range of USD/t 1,215 and USD/t 1,307 in March.

The aluminum market was under influence of technical factors that impacted the markets for nearly all nonferrous metals in March. Lack of demand and no significant purchases by investment funds led to a drop in aluminum price. More than any other nonferrous market, the aluminum market depends on business of investment funds. This is why the news on the crisis in activities of Tiger Management Fund, which is one of the leaders in this business, became the key factor affecting the market in March 2000.

Another event that adversely impacted the aluminum market was the announcement that regulatory bodies blocked the merger of Alcan, Alcoa, and Pechiney. It is still quite possible that the merger process will press on in some other form. Prior to that, the market expected that the successful merger would cut the productive capacities down. However, the failure of this merger depressed the market once again.

Slackened activity of the Japanese market contributed to the reduction in aluminum prices as well. There is evidence of a new decline in the country’s metallurgical industry. The Japanese market used to have high demand for semi-finished aluminum and, consequently, for base metals, whereas the end-of-March statistics indicated that internal demand for base metals shrank somewhat.

Augmentation of aluminum output in Russian and Chinese smelters causes an unfavorable effect on the situation too. The major Chinese aluminum producers boosted their output by 14-22% in the first quarter of 2000 compared to the respective 1999’ level.

Figures indicate a growth of the world aluminum output in addition to the 283,000-tonne surplus of aluminum manufactured in 1999. This situation owes to launching of new aluminum-smelting capacities and reopening of the mothballed productions. According to the latest data, capacities that have recently been put into operation in New Madrid works and in USA-based Hawesville smelter are going to drive the aluminum production up. It is also planned that Mozal and Alscon smelters will recommence operation in Africa, along with similar steps of several mills in India and Indonesia.

USA

According to the estimates of the National Aluminum Traders Association, supplies of aluminum sheets and plates, pressings, and other rolled aluminum will go 4% up this year and will gain another 3% in 2001.

However, these figures are below the 6.4% growth tempo of 1999. It is expected that supplies of these products to the USA will add to around 1,200,000 tonnes (t), which is higher than roughly 1,150,000 t supplied in 1999.

Europe

Augmentation of aluminum consumption in Europe will be higher this year than back in 1999. Growth of flat-rolled aluminum consumption in Germany, which came to 3.6% in 1999, will continue in the current year. In addition, export of aluminum products steadily remains at a high level and internal consumption is going up rapidly.

Premiums for aluminum made in CIS countries did not alter in March and were registered in Rotterdam at:

USD/t 20-25 for A5 aluminum;

USD/t 25-30 for A6 aluminum;

USD/t 35-40 for A7 aluminum.

Asia

Despite the fact that Japan is showing unfavorable economic performance in comparison with the USA, the EU, and other Asian countries, Japan’s aluminum consumption is expected to grow 2.3% in 2000.

This forecast may be explained with the fact that in the first quarter of 2000 internal consumption of aluminum sheets and plates in Japan went 8% up against the respective 1999’ figure and reached 91,000 tonnes (t), whereas consumption of aluminum pressings gained 11%.

Outlooks

Experts go on giving positive assessment to the current situation on the aluminum market and forecast a 3.5-4.0% increase in demand for this metal in the Western world in 2000.

After a short decline in March, demand for aluminum will generally resume its growth on the global market in the second quarter of 2000, adequately heating the prices up.

Table 1. LME aluminum quotations in 1998-2000 (January-March), in USD per tonne

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

Table 2. Average LME aluminum prices in 1995-2000 (January-March), in USD/t

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

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

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

Table 5. Dynamics of LME aluminum prices in 1998-2000 (January-March), in USD/t

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

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

Copper

Quotations for copper continued going down in March. Average monthly price for copper that month came to USD/t 1,739.39, that is USD/t 61.5 lower than the month-before level. The low and the high LME March quotations for copper were USD/t 1,703 and USD/t 1,779 respectively. Just like in case with aluminum, lowering of copper price was caused by recession in Japan and by a 19.4-19.6% augmentation of copper output in Kazakhstan and China in March.

Another important factor was the news that Ok Tedi mine in Papua New Guinea, the producer of copper concentrate, will continue its operations for the near future. As it is known, the World Bank recommended that the mine be closed for environmental reasons. However, the mine will proceed functioning so far for the reason that it is of crucial economic importance for the country and BHP company, which is the mine’s main owner.

The other factors that contributed to lowering of prices on the copper market were a 1.1% increase in copper output by Escondida company and the forecast that Los Pelambres companies plan to increase copper output from 246,000 t to 275,000 t per year.

USA

Supplies of copper, copper-based alloys, and their products to the US market increased 16 to 19% compared to the level registered at the beginning of 1999, which evidences further favorable development of the economic situation on the American market.

Europe

Germany has been steadily increasing its consumption of copper and copper products in recent months, leading to growth of cathode copper premiums from USD/t 5-10 to USD/t 10-15.

Premiums for cathode copper on the British market increased from USD/t 37-42 up to USD/t 40-45. The premium corridor in Rotterdam extended by USD/t 10 to USD/t 25-40. Earlier, it ranged between USD/t 25 and USD/t 30.

Asia

The Japanese market for copper products keeps upsetting the main players on the copper market. Demand for copper on the Japanese market remains low. Moreover, a 0.5% decrease in Japanese purchases of copper wire and cables was reported in February 2000.

It is expected that only a 1% increment of demand for these products will be registered in Japan in 2000. Taking into account the 13% drop of this figure in 1999, the current situation is most likely to be called unfortunate. The year 2001 is forecast to bring further curtailment of demand for cable products in Japan because investments in telecommunications and electric power keep low.

Outlooks

Despite the recent drop in prices for copper, experts are quite optimistic about the outlooks for development of the situation on this market in 2000.

Stable demand and significant curtailment of copper stocks are to contribute to increase in copper prices in the short run. In addition, the second quarter of the year has traditionally been a favorable time for price mark-ups.

As earlier, it is expected that prices for copper will stabilize at USD/t 1,750-1,800 in the second quarter.

Demand for and supply of copper will be rather balanced.

Table 7. LME copper quotations in 1998-2000 (January-March), in USD/t

Table 8. Dynamics of LME copper prices in 1998-2000 (January-March), in USD/t

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

Table 9. Average LME copper prices in 1995-2000 (January-March), in USD/t

UKRAINE

Foreign trade

Data on the first quarter of 2000 indicate that export of nonferrous metals and nonferrous articles totaled 151,400 t worth USD 156,900,000, which exceeded the corresponding 1999’ figures of 105,900 t and USD 95,300,000 by 42.98% and 64.6% respectively.

Copper and aluminum products accounted for 92.09% of the total Ukrainian export of nonferrous metals and for 91.11% of nonferrous export revenues. These figures prove stable trends in Ukrainian nonferrous exports.

Export of copper and aluminum commodities in the first quarter of 2000 surpassed the respective 1999’ figures by 40.42% in terms of physical quantity and by 66.10% in terms of export revenues.

Exports of nickel, lead, and zinc remain low amounting to around 2,305.6 t (1.52% of the total) worth USD 775,800 (0.5% of the total revenues) in the first 3 months of 2000. For comparison, the respective January-March 1999’ figures were 1,910 t and USD 1,264,930.

Export of other nonferrous metals, cermets, and their products went up significantly (+55.65% in terms of physical exports and +1.84% in terms of export earnings) compared to the figures registered in the first quarter of 1999. In January-March 1999 some 2,767.6 t of these products were exported yielding USD 4,097,000, whereas in the first quarter of 2000 export of these articles amounted to 7,075.35 t for the total of USD 8,269,350. The portion of these products in the total nonferrous exports came to 4.67% (physical quantity) and 5.27% (revenues).

Copper

Some 30,800 t of copper and copper articles worth USD 27,400,000 were exported in the first quarter of 2000, which exceeded the last year’s physical export figure by 8.55%, whereas export revenues went nearly 16% down.

As before, refined and unrefined copper and copper alloys were the leaders among copper products exported in the first 3 months of 2000. A little over 860 t of unrefined copper worth USD 843,000 and 1,437.7 t of refined copper and copper alloys worth USD 1,375,600 were exported in the first quarter of 1999, whereas January-March 2000 saw these figures at 3,887 t worth USD 3,230,000 and 11,544 t worth USD 11,130,000 respectively.

Continuing the previous trends, export of copper scrap reduced in January-March 2000. Some 23,700 t of copper scrap for the total of USD 25,700,000 were exported in the first 3 months of 1999, while the corresponding period of 2000 reported 14,580 t of copper scrap worth USD 11,700,000. These figures are respectively 38% and 54% below the last year’s and are the result of the law of Ukraine “On Metal Scrap” that was passed back in 1999.

Aluminum

The aluminum group is the unwavering leader of the whole nonferrous exports from Ukraine. Export supplies of aluminum commodities accounted for 71.77% of the total export of nonferrous metals and yielded 73.66% of the total nonferrous export revenues in the first quarter of 2000.

The period from January till March 2000 saw exports of aluminum and aluminum products reaching 108,600 t and yielding USD 115,500,000, whereas the corresponding amount exported in the first quarter of 1999 totaled 70,940 t worth USD 72,150,000.

In the first quarter of 2000 export of aluminum and aluminum products gained 53.14% in terms of physical quantity and 60.14% in terms of export revenues compared with the figures reported in the first quarter of 1999.

The main export commodities within the aluminum group were primary aluminum ingots and unrefined aluminum alloys, which collectively accounted for 78.89% of the total physical exports of aluminum and brought in 82.17% of revenues from aluminum exports. The absolute values of these figures registered in January-March 2000 were 85,700 t and USD 94,900,000. These are respectively 38.5% and 49.6% higher than the figures reported during the first 3 months of 1999.

In the first quarter of 2000 export of aluminum scrap amounted to 19,800 t worth USD 14,300,000, which corresponds to 254.5% and 203.35% of the last year’s figures. Just as in previous years, augmentation of aluminum scrap export was a result of the growing number of tolling contracts on aluminum scrap export, which became possible after the Law of Ukraine “On Metal Scrap” had been passed.

Distinctive features of export supplies

The largest export articles in the first quarter of 2000 were as follows:

unrefined aluminum and aluminum alloys with 85,700 t (56.62%) worth USD 94,900,000 (60.53%);

aluminum scrap and wastes with 19,800 t (13.08%) worth USD 14,300,000 (9.13%);

copper scrap and wastes with 14,580 t (9.64%) worth USD 11,740,000 (7.49%).

Regional distribution of export supplies

Regional distribution of export supplies of copper, aluminum, and their products in January-March 2000 was as follows.

Germany continued holding the leadership in copper imports accounting for 73% of the total copper products exported from Ukraine, i.e. 22,500 t worth USD 20,500,000 (74.72% of the total revenues).

Belgium was second to Germany with a large breakaway importing 2,540 t of copper products worth 2,450,000 (8.25% and 8.93% respectively). Italy held the third position with 1,210 t worth USD 1,040,000 (3.93% and 3.81%).

Just as in previous months, the largest importers of copper products within the CIS were the Russian Federation with 560 t worth USD 890,000 (1.81% and 3.23%) and Belarus with 150 t worth USD 290,000 (0.49% and 1.07%).

The USA was the top importer of aluminum commodities consuming 18,760 t of Ukrainian aluminum products worth USD 16,500,000 (17.26% and 14.32%).

Italy came second with 17,300 t worth USD 18,100,000 (15.91% and 15.64%). Next came the Russian Federation with 15,220 t worth USD 24,130,000 (14% and 20.08%); Hungary with 11,030 t worth nearly USD 15,560,000 (10.16% and 13.47%); and Germany with 11,700 t worth USD 10,620,000 (10.77% and 9.19%).

Table 10. Exports of nonferrous metals and nonferrous products in January-March 1999-2000

Table 11. Main articles of Ukrainian exports of copper and copper products in January-March 1999-2000

CONCLUSIONS

Specific features of Ukrainian nonferrous exports unambiguously indicate that export pattern has remained unchanged in terms of articles, as well as in terms of regional destinations. The only event worth mentioning is a new situation with nonferrous scrap exports. As a result of tolling supplies, export of aluminum scrap began to remind an avalanche in the first quarter of 2000 exceeding the last year’s corresponding figure more than twofold despite the restricting provisions of the law “On Metal Scrap”.

At the same time, export of copper scrap significantly shrank in the first three months of 2000. Unfortunately (or fortunately), it was not the effect of the new law “On Metal Scrap” that produced this situation with copper, but rather a commonplace shortage of raw materials on the Ukrainian domestic market, which was rather brought about by heavy exports.

On the whole, export of nonferrous metals from Ukraine resembles an old deck of barely shuffled cards with nonferrous scrap, aluminum and copper alloy ingots being the permanent trumps.

Table 12. Geographical distribution of Ukrainian exports of copper and copper products in January-March 2000

Table 13. Main articles of Ukrainian exports of aluminum and aluminum products in January-March 1999-2000

Table 14. Geographical distribution of Ukrainian exports of aluminum and aluminum products in Jan-Mar 2000

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