New factors influencing exports of nonferrous metals are in place.

NONFERROUS METALS

Vyacheslav POPOV, expert with DerzhZovnishInform

New factors influencing exports of nonferrous metals are in place.

GLOBAL MARKET

Aluminum

An upward tendency in prices for aluminum, which started back in mid-1999, expired in February 2000, when the average level of LME quotations moved down by USD/mt 10 against the month-before level to USD/mt 1,670.67. In February LME quotations for aluminum ranged within USD/mt 1,596.5-1,740.0 with the high registered on the first day of the month and the low on the last day, thus mirroring price trends that prevailed throughout the whole month, i.e. the less time remained till the end of the month, the lower the prices were.

Aluminum prices were traditionally followed by prices for А380.1 aluminum alloy. However, the downward trend in prices for aluminum alloy outpaced that of aluminum prices. While average monthly price for aluminum dropped by 0.6%, the price for aluminum alloy suffered a 3% decrease to USD/mt 1,347.43. To compare, in January 2000 the alloy price was at USD/mt 1,389.13. The range of fluctuations in prices for this alloy sprang from USD/mt 1,296 to USD/mt 1,385. Like in case of aluminum, the high and the low were respectively registered on the first and in the last day of the month.

It is worth mentioning that in February the situation on the market for aluminum was strongly influenced by the alumina factor. Difficulties encountered with supplies of this raw material heated the prices for alumina up to USD/mt 450, which in turn slowed down further expansion of aluminum production, especially in China. According to the data with the International Primary Aluminum Institute, aluminum production expands year-on-year and month-on-month. Improvement of the global economic situation, especially in S.E. Asia after the 1997-1998 crisis, gave a new push to recovery of aluminum production on idle capacities and to phasing in of new capacities.

It was the global expansion of industrial capacities that mainly influenced the level of prices on the aluminum market. However, so far, the level of aluminum production is well-balanced with the rather high consumption, thus in the near future aluminum prices are likely to keep stable.

In February 2000 the level of premiums for aluminum made in the CIS was practically unchanged (though premiums for A6 aluminum decreased by USD/mt 5.0) and indicated the following rates in Rotterdam as of the end of December:

USD/mt 20-25 for A5 aluminum;

USD/mt 25-30 for A6 aluminum;

USD/mt 35-40 for A7 aluminum.

Outlooks for aluminum market

Experts believe that, due to a relative equilibrium of supply and demand, in the near future the prices for aluminum can consolidate on the current marks, that is at the average of USD/mt 1,570-1,650.

Table 1. LME aluminum quotations in 1998-2000 (January-February), in USD per metric ton

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

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

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

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

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

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

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

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

Copper

Like on the market for aluminum, in February the prices for copper plunged against January. In February average monthly price for copper was USD/mt 1,800.83, about USD/mt 45.0 lower than a month before.

In February the margin fluctuations of LME copper quotations were USD/mt 1,726-1,840.5.

The situation on the market for copper somewhat reminded the situation on the aluminum market. There is rather strong demand for copper, especially in Asian countries. However, output of this metal that did increase after improvement of the global economic situation creates a surplus on the market. The only comforting fact is that not as many companies as it was expected are going to follow the example of Rio Tinto, which recommenced mining activities at a small copper mine Cerro Colorado.

Increase in global copper production is counterbalanced with stable demand for this metal. The main contribution to enhancement of copper demands was made by such industries as construction, production of air conditioners, and automotive. It is worth mentioning that hot interests to the Internet lead to expansion of multiplex telephone networks to provide private premises with access to the worldwide web. This also intensifies demand for copper wires.

As for the regions of the world, a number of specialists report that the US economic growth is slightly slowing down, which can negatively influence demand for copper in this country.

However, speaking about slackened economic growth in the USA in the present year, the MBR specialists nonetheless forecast stable demand for this metal.

The situation on the European market for copper keeps on improving. Forecasts for development of the situation in Europe remain rather optimistic. According to the latest statistics, Germany boosted production of semi-finished products by 34.9% last year. Besides, businessmen are absolutely positive in favorable economic development (the confidence level is the highest for the last five years). According to the data with the German Chamber of Commerce and Industry, some 33% out of 25,000 German companies pin hopes to changes for the better.

Stronger demands for copper in Germany are reflected in the level of copper premiums in Hamburg. In January-February of the present year premiums for A copper added USD/mt 5.0 to the LME prices up to the level of USD/mt 10-15.

Supposedly, China, which is one of the main players on the copper market, will have greater demand for copper in the present year, taking into consideration that the 1999 copper imports by China gained 300% to 310,000 metric tons due to phasing in of the state program for development of high-voltage electric transmission lines. In January China imported 94,108 mt more (+67%) copper and copper semis than in the respective period of 1999, which proves the trend toward expansion of import supplies.

Outlooks for copper market

According to forecasts, there is a good potential for greater copper prices. However, to make this possible, it is necessary to lower copper stocks on the market simultaneously with stable demand. This can be reached via restriction of production outputs. In the nearest months it is expected that industrial and technical factors will keep the copper prices stable.

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

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

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

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

UKRAINE

Foreign trade

Like in January, exports of ferrous metals from Ukraine kept on gaining volume in February 2000.

According to the State Statistics Committee of Ukraine, in February 2000 the total Ukrainian exports of nonferrous metals and products totaled 98,800 metric tons, 50.87% more than the 65,500 mt of January-February 1999. In the first 2 months of 1999 nonferrous exports yielded USD 70.3 million, which is 23.3% less than in the respective period of 1999 (USD 86.65 million).

In January-February 2000 copper and aluminum accounted for 91.17% of the total exports of nonferrous metals from Ukraine and brought in USD 89.17 million of export revenues. This means that aluminum, copper, and their products are once again the main articles of nonferrous metal exports beyond Ukraine.

In the first 2 months of 2000 physical exports of copper and aluminum commodities increased by 43.34% with export earnings gaining 37.38%.

Revenues from export of 1,921.91 mt of nickel, lead, and zinc totaled some USD 594,350 (+1.95% in terms of physical exports and +0.69% in terms of export revenues). To compare, the respective figures of January-February 1999 were 909 mt worth USD 548,000.

At the beginning of the year 2000 there was a substantial increase in exports of other nonferrous metals, cermets, and their products compared to the figures of the first 2 months of 1999 (+1,024.48% in terms of physical volume and +221.64% in terms of export revenues). These commodities accounted for 5.26% of total physical nonferrous exports from Ukraine and yielded 6.46% of the total nonferrous export earnings. In the 2 months of 2000 Ukraine exported 5,193 mt of other nonferrous metals, cermets, and their products worth USD 5,595 million.

Copper metals

In January-February 2000 exports of copper and copper products reached 18,900 mt (+11.37% against the respective 1999 figure) worth USD 16.8 million (-15.5%).

At the beginning of the year 2000 exports of refined and unrefined copper and copper alloys in ingots continued climbing up. In January-February 1999 copper export figures seem rather humble compared to the respective 2000 figures. While in the first 2 months of 1999 exports came to slightly over 250 mt of unrefined copper worth USD 376,000 and 898 mt of refined copper and copper alloys worth USD 844,500, in January-February 2000 these figures advanced rather significantly to respectively 1,702 mt worth USD 1.45 million and 7,282 mt worth USD 7.02 million.

Like in the last months of 1999, in January-February 2000 export of copper scrap kept on narrowing. To compare, in the first two months of 1999 exports of copper scrap totaled 14.47 mt worth USD 15.9 million. During the 2 months of 2000 export of copper scrap reached 9.46 mt worth USD 7.58 million, i.e. -34% and -52% respectively against the previous year’s figures. This downswing was brought about by passing of the law “On metal scrap” in 1999.

Aluminum metals

Aluminum group traditionally remains the backbone for the whole exports of nonferrous metals. Physical supplies of aluminum commodities made up 72.05% of the total export of nonferrous metals and yielded 86.92% of the total revenues from nonferrous exports.

In January-February 2000 exports of aluminum and aluminum products indicated 71,180 mt worth USD 75.32 million, while in January-February 1999 these figures were 45,880 mt and USD 47.4 million. In the first 2 months of the year 2000 exports of aluminum and aluminum products exceeded the respective 1999 figures by 55.15% in terms of physical shipments and by 58.9% in terms of export revenues.

The main export commodities within the aluminum group were primary aluminum in ingots and unrefined aluminum alloys that accounted for 79.49% of the total physical exports of aluminum metals and brought in 83.07% of earnings from aluminum exports. In January-February 2000 these figures were 56,600 mt (+40.41% against the first 2 months of 1999) and USD 62.6 million (+47.72%).

Table 10. Export dynamics of nonferrous metals and nonferrous products in January-February 1999-2000

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

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

In January-February 2000 Ukraine exported 12,730 mt (+179.6% against the 2 months of the previous year) of aluminum scrap worth USD 9.3 million (+140.66%).

Increase in exports of aluminum scrap, like before, origins from increase in tolling export supplies, because the law "On metal scrap" permits tolling export transactions with aluminum scrap.

Distinctive features of export supplies

In January-February 2000 the largest export articles were as follows:

Unrefined aluminum and aluminum alloys – 56,600 mt (57.28 %) worth USD 62.6 million (72.21%);

Aluminum scrap and wastes – 12,730 mt (12.88%) worth USD 9.26 million (10.68%);

Copper scrap and wastes – 9,460 mt (9.57%) worth USD 7.58 million (8.74%).

Regional distribution of export supplies

In January-February 2000 geographical distribution of export supplies of copper and aluminum was as follows. Traditionally, Germany holds the leadership in imports of copper commodities. This country consumed about 75% of all copper group commodities outbound from Ukraine, that is 14,100 mt worth USD 12.87 million (76.56% of the total export revenues).

Belgium ranks the second with a weighty breakaway, 1,390 mt worth USD 1.34 million (7.34% and 7.95% respectively). The third position is held by Italy with 970 mt worth USD 0.84 million (5.6% and 4.98%).

Like in previous months, the CIS leaders in copper imports from Ukraine were the Russian Federation with 310 mt worth USD 0.46 million (1.64% and 2.74%) and Belarus with 110 mt worth USD 0.21 million (0.58% and 1.23%).

In January-February 2000 the USA was the top importer of aluminum from Ukraine with 11,690 mt worth USD 9.97 million (16.42% and 13.20%). Italy scored very close to the USA with 11,360 mt worth USD 11.92 million (15.95% and 15.77 %), while Russia imported 9,970 mt of Ukrainian aluminum worth USD 15.67 million (14% and 20.72%), Hungary 7,780 mt worth nearly USD 11 million (10.93% and 14.52%), and Germany 7,410 mt worth USD 6.73 million (10.41% and 14.52%).

Another leading importer of Ukrainian aluminum products is Latvia with 4,900 mt worth USD 2.5 million (6.8% and 3.32%). This country has recently become home to a number of offshore companies, which serve as a preferable bridge to transactions in aluminum and aluminum alloys with Europe.

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

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