The IISI specialists forecast that steel consumption will be gradually increasing worldwide throughout 2000-2005. The new trend in metal business will be greater production of steel in electric arc furnaces, while almost all the steel will be poured with continuous casters. According to the recent research of the IISI, the global electric arc capacities will expand at the pace of 2% per year in the course of the coming decade. By 2005, electric arc furnaces will account for more than 40% of the world steel output. This means that ferrous scrap will constantly be in demand for a number of years to come.

As large metallurgical mills backed with banking institutions merge together to establish large national and multinational industrial structures in various parts of the world, globalization of the world steel market is intensifying. These mergers can fundamentally change the situation, making substantial corrections to the mentioned forecasts for steel output.

STEEL OUTPUT IN UKRAINE

Metallugprom association reports that Ukrainian metallurgical mills manufactured 5,847,000 mt of iron (+13%), 7,278,000 mt of steel (+19%), and 4,909,000 of rolled products (+3%) in the first 3 months of 2000. The data on Ukrainian production of iron, steel, and rolled metal are presented in tables 2 and 3.

During the first 2 months of 2000 Ukraine exported 4,208,920 mt of metal products (code 72 under the Commodity Nomenclature for Foreign Economic Activities) for the total value of USD 643,640,000. The physical volume exported was 33.1% greater than metal exports in the respective period of 1999, while export revenues gained 50.3%.

The largest contributors to growth in exports were the outbound supplies of rolled steel products (+36.85% up to 3,135,000 mt) and ferrous scrap and waste (+41.8% to 661,100 mt).

It is notable that January-February 2000 witnessed the recovering exports of practically all the types of rolled products, e.g. export supplies of wire rod gained 75% (up to 226,000 mt), semi-finished steel +53% (up to 1,346,000 mt), bars +39% (to 73,400 mt), cold-rolled flats +37% (to 219,000 mt), hot-rolled flats +22.1% (to 733,000 mt), and reinforcing bars +14.8% (to 394,000 mt). Regardless the quota barriers imposed, exports of ferrous scrap and waste also grew 41% up (to 661,000 mt). At the same time, exports of iron reduced by 9% (down to 301,000 mt) owing to higher prices charged for metal scrap.

The principal items of Ukrainian metal exports were semi-finished steel (accounting for 31% of the total metal exports), HR flats (17.4%), ferrous scrap and waste (15%), iron (7.1%), CR flats (5.2%), and wire rods (5.3%).

Table 4 contains the detailed data on metal exports from Ukraine in the 2 months of 1999 and 2000.

Regional pattern

Ukrainian metal exports are bound to about the same regions as a year ago. In the first 2 months of 2000 the major markets for Ukraine’s metallurgical mills were Southeast Asian countries (consuming 28.7% of the total Ukrainian metal exports or 1,211,000 mt), Middle Eastern countries (26.9%, 1,134,000 mt), East European states (11.04%, 464,000 mt), and North American economies (12.1%, 513,000 mt).

Table 2. Production of iron, steel, and rolled metal in Ukraine

Table 3. Production by Ukrainian metallurgical mills in January-March 2000 (‘000 metric tons)

In the meantime, metal exports bound to Middle Eastern countries climbed 32.9% and to CIS member-states +64% (to 246,000 mt) against the first 2 months of 1999. There has been reported a weighty increase in export supplies to East European markets (almost tripled reaching 464,000 mt) and North American countries (almost +2.5 times up to 513,000 mt). Ukraine only slightly increased metal exports to S.E. Asian markets (+1.2%). Along with that, Ukrainian metal exports to South and Southwest Asian countries plunged by 53% (to 28,400 mt), to South American countries -39% (to 12,830 mt), and to African countries -3% (to 214,000 mt).

The statistics on regional pattern of Ukrainian metal exports are presented in table 5.

Europe

In 2000 crude steel output in Europe can well surmount the last year’s figure and even go beyond the 160 million mt reported in 1998. European steelmakers count on the continuing recovery in Southeast Asia and on willingness of European authorities to counteract unfair trade that violate the WTO rules and principles. The current upswing on the European market is predominantly brought about by more dynamic activities of the automotive industry spurred by devaluation of the EURO against the US dollar. It is predicted that the first half of 2000 will see stable economic growth followed with greater demands for steel, though EU metallurgical mills will skim all the cream by themselves.

Table 4. Export of metal products from Ukraine

Table 5. Distribution of Ukrainian metal exports by regions of the world

After European rolling companies got rid of cheap imports, certain overseas manufacturers have started showing interest in the EU market. European rolling enterprises now purchase HR coiled sheets from Asian countries and Australia and even plan greater imports from Japan starting March 2000.

Domestic European prices for HR steel coils can reach the pre-crisis level spurred by the recent intensive growth. In the second and the third quarters of the year export prices for HR steel coils are anticipated to be kept up on the March level of USD/mt 320, while prices for CR steel coils may stick to USD/mt 390.

If prices for long products fail to increase, manufacturers may well lower outputs due to a mark-up in prices for scrap metal.

The European demands for flat-rolled products are still far greater than the supply. Supplying companies are doing their best, through frequently they fail to handle the flood of orders, thus violating delivery schedules. Automotive, machine building, power generation, and construction still have high demands, which means that the overall consumption of rolled steel is likely to increase in 2000. Flat-rolling mills work at full capacity and steelmakers import slabs at higher prices, e.g. in March 2000 Germany purchased Russian slabs at USD/mt 200-225 FOB the Black Sea, while a year ago the prices equaled to some USD/mt 150.

This European market is overheated because local manufacturers prefer making flat-rolled steel supplies to North America and Asia, where the prices are EUR 30-40 higher. Besides, poor performance of the EURO currency discourages import business. This situation will most probably last till the third quarter of the year inclusive. Though European imports of steel lowered somewhat in 1999, the volumes imported are still high enough.

Altogether, the iron and steel industry of Europe has moved into a recovery. In mid-2000 the prices will climb up to the 1998′ highs. Prices for plates are expected to increase in the second quarter of 2000 (gaining almost EUR/mt 40). Though the overall European demands are rather moderate, Germany and Great Britain are short on plates.

By 2005, the EU-15 states are anticipated to consume 142 million mt of steel per year (+2.9 million mt in 2000-2005 and +1.1% throughout the decade). The rest of Europe is estimated to increase steel consumption by 2.5 million mt in 2000-2005 and by 2.4% in the course of decade.

This market was one of the most lucrative pieces for exporters of Ukrainian metal in 1999 owing to strong demands and adequate prices. In 1999 Ukraine exported 2,038,000 mt (+2.1% against 1998) of metal products worth USD 274,553,000 (+26%) to the EU. Better export performance was hampered by quotas imposed as far back as in 1995. Notably, Ukrainian companies covered almost 95% of the 1999 quota for rolled steel. Ukraine exported 135,000 mt of HR flats, including plates and coils, i.e. 1.72% more than in 1998. Yet, this number is much smaller than the actual potential of Ukrainian exporters.

In 1999 bars were once again in demand on the European market. That year EU-bound exports of Ukrainian bars amounted to 17,710 mt (+86%). Thus, Ukraine executed 85% of the quota fixed.

To make a summary of Ukrainian metal exports to the EU in 1999, one should keep in mind that the main items were semi-finished steel (accounting for 36.2% of the total Ukrainian metal exports to the EU or 739,000 mt), ferrous scrap and waste (31% or 630,000 mt), and iron (15% or 308,000 mt). Though exports of semis and scrap gained 58.27% and 2.35% respectively, export supplies of iron reduced by 43%.

During the first 2 months of 2000 Ukraine featured the same trend of boosting EU-bound metal supplies, though the products exported were different.

Throughout this period Ukraine exported 367,580 mt (+25.97% against the first 2 months of 1999) of metal worth USD 58,435,000 (+32%) to the EU. Exports of rolled steel reached 229,000 mt with the total value of USD 41,772,000.

Export supplies improved against the 2 months of 1999 owing to greater EU-bound export supplies of semi-finished steel, including rolling billets, skelp, and slabs (+41.6% to 179,000 mt), and ferrous scrap and waste (+2.7 times to 109,000 mt). The former products accounted for 48.8% of the total Ukrainian metal exports to the EU, while the latter for 29.6%. This means that Ukraine is nothing but a source of raw materials for the EU.

At the same time, Ukrainian exports of HR flats plummeted by 54% against the 2 months of 1999 (down to 10,160 mt) and those of rebars lost 10% (to 5,600 mt), while exports of bars increased from 630 mt in 1999 to 7,810 mt in 2000.

Western European steelmakers intend to continue driving the domestic prices for sheets up because the demands are on the rise and inflow of cheap products from the third countries has been lowered considerably.

Certain experts mention that European manufacturers can hardly compete with CIS suppliers that offer rolled products at low prices of USD/mt 210-280 FOB. Yet, this statement causes serious doubts because the quality of CIS-made metal simply cannot compete against that of the European commodities.

The Western European market for long products, e.g. rebars and wire rod, is recovering pushed by greater demands of construction firms. Starting mid-January 2000 European producers, such as Nedstaal, Saarstahl, and Ispat International, have put up the prices for long products. At the same time, Ukrainian export prices for EU-bound long metal have been stable lately (USD/mt 210-220 FOB for wire rods and USD/mt 210-230 FOB for rebars in March 2000).

Table 6 shows the European prices for rolled products.

CIS member-states (Russia)

In 2000 imports are expected to settle at 4 million mt and exports at 35 million mt. The IISI gives a rosy forecasts that CIS demands will rise by almost 1.7 million mt throughout 2000-2005 (it is predicted that 31.3 million mt of steel will be consumed on this market in 2000), though the 10-year forecast anticipates a 1% drop in demand from 36.3 million mt to 33.0 million mt.

At this point of time, hot global demands for HR and CR coils foster the increase in prices for CIS-made rolled steel. Prices for Russian semi-finished steel are on the rise because recovery of domestic demands and greater transportation charges discourage exports to Asian markets, even though the Asian prices are high enough. This situation will be traced in the second quarter of the year as well, although the growth in demands and prices may slow down.

In late 1999 the Russian economy started showing signs of live after the August 1998 crisis. Naturally, the market for rolled steel shifted into a recovery because strong domestic demands raised the prices. Ukrainian exporters have returned back to this market.

During the 2 months of 2000 Ukraine supplied 104,320 mt (+52.7% against 1999) of rolled steel worth USD 27,524,800 (+30.5%) to Russia.

This year has seen an increase in exports of HR flats (from 7,820 mt in the first 2 months of 1999 to 27,320 mt now), CR flats (from 2,900 mt to 12,080 mt), and rebars (from 8,640 mt to 23,450 mt).

Besides, Russia-bound exports of Ukrainian bars (mainly angles and channels) gained 10.86% to 20,280 mt and of other flat-rolled products (galvanized sheets and coils) gained 77.8% reaching 9,460 mt.

The first two months of 2000 saw a downswing in Russia-bound exports of wire rod (down by 58.5% to 2,800 mt) and semi-finished steel including skelp (-62% to 5,670 mt).

Throughout this period the main articles of Ukrainian exports to Russia were HR flats contributing 26.19% to the total exports of Ukrainian metal to Russia, rebars with 22.4%, bars with 19.44%, CR flats with 11.5%, and other flat-rolled steel including galvanized flat-rolled items with 9.07%.

Hot-rolled and galvanized flats meet especially strong demand on the Russian market. In March average export prices for HR sheets amounted to USD/mt 210-250 DAF and for galvanized flat-rolled steel USD/mt 420-450 DAF. Russia, especially the southeastern part of Russia, has demands for angles and channels that are exported from Ukraine at approximately USD/mt 170-180 DAF.

Average Russian prices for major metal products are described in table 7.

USA

Since the beginning of this year, the consecutive 9-year boom of the US economy has been followed with stable strong demands for steel. Downswings in demand in selected industries are offset with growing automotive consumption.

US steelmakers urge more antidumping penalties against imports of rolled products, thus initiating a gradual reduction in import supplies. Most likely, antidumping inquiries will keep on ravaging and further pushing down imports of finished steel. In the first half-year prices for almost all the types of rolled steel will be on the rise. Obviously, this is the reason why exporters from many countries of the world, including Ukraine, endeavor to enter this market.

Throughout the first 2 months of 2000 Ukraine exported 437,700 mt (+2.13 times against the respective 1999′ period) of metal products worth USD 62,443,140 (+3.6 times) to the USA.

Table 6. European prices for rolled products (USD/mt)

Table 7. Domestic Russian prices for rolled metal (RUR/mt, delivered to buyer’s warehouse, VAT not included)

Notably, iron made up 43% or 190,000 mt of the total exports of Ukrainian metal to the USA, semi-finished steel and slabs 23.8% or 104,000 mt, wire rod 14.9% or 65,400 mt, HR flats 11.5% or 50,500 mt, and rebars 4.1% or 18,300 mt. Exports of all the mentioned items soared considerably.

Sure enough, the booming market and high demands nourished the put-up in domestic and import prices for metal. At the beginning of spring 2000 the largest US steelworks announced a USD/mt 20-25 mark-up in prices for flat-rolled steel. In March 2000 HR plates cost USD/mt 360-380 CIF. The US market has especially advantageous demands for steel coils. HR coils were offered at USD/mt 350-370 CIF and CR coils at USD/mt 470-490 CIF.

In March 2000 US manufacturers boosted purchases of semi-finished steel to be further worked into flat-rolled products. Similar situation is traced on the US market for long products, namely rebars and wire rods, owing to the booming construction business in the USA.

The NAFTA member-state will consume 140 million mt of steel in 2005 (gaining 4.2 million mt in 2000-2005 and +1.8% in the course of this decade).

Table 8 shows the US prices for rolled steel.

Latin America

The Latin American Iron and Steel Institute estimated that the 1999 consumption of rolled steel dropped 13% (to 41.3 million mt) in Latin America pushed down by the financial turmoil in S.E. Asia and Russia.

However, in late 1999 Latin American exports of rolled metal, notably slabs and HR coils, gained 7.5% against 1998 owing to a recovery on the global market.

Brazil is a perfect sample to illustrate the trends on this regional market. In 1999 Brazil manufactured 2.4% less steel than in 1998, though the Brazilian Steel Institute forecasts that steel output in this country will surpass the 1999 figures by some 8-10% reaching 27-32 million mt in the course of 2000.

According to the latest estimates, domestic Brazilian trade in flat-rolled steel will increase 6.1% to 15 million mt in 2000. The advantageous factor is that the Brazilian automotive industry is planning to boost output by the average of 10%.

It is also anticipated that Brazil will make 5-7% greater exports of rolled steel, notably semi-finished products such as slabs, thus exporting some 10-11 million mt. Spurred by the 6.5% growth in visible consumption of rolled steel (to 15.2 million mt), imports will come to some 750-800 thousand mt in 2000.

Prices for exportable Brazilian metal have been keeping stable, with slabs being the only commodity enjoying the increasing prices. HR flats made in Brazil meet nice demands on the global market.

Table 9 shows the level of steel prices in Latin America.

Asia

In 2000 Asia will remain a decent net exporter of steel. Save for China, Japan, and South Korea, all the other Asian countries will have to import up to 22 million mt of steel during 2000. Steelmaking in Asia will upswing as the overall economy of the region recovers. In 1999 steel prices increased at least 40% against the 1998 lows. Steel prices may gain some more 20-30% before the next peak level in late 2000.

Asian metallurgical mills are showing clear signs of merger-mania. Large Korean, Japanese, Philippine, and Indonesian manufacturers have already engaged in mergers or consider this opportunity.

The overall Asian demands are constantly going up. Japanese and Chinese mills manufacture a lot of steel spurred by active construction in the neighboring countries. CIS countries are the only large source of semis for Asian countries.

Table 8. US prices for rolled products (USD/mt)

Table 9. Latin American prices for rolled steel (USD/mt)

Since the beginning of 2000, output of crude steel in Japan has been recovering (+17% in February) followed with recovery in production of various rolled products. However, the deteriorating demands lead to the piling up stocks (+4.3% in January 2000 against December 1999). Several companies have already announced a cutback in supplies to get rid of excessive stocks.

The Japanese steel output will gradually approach 70 million mt in 2005, though the overall demands will reduce by 1.3% during the decade (because the year 1995 saw consumption of 80 million mt of steel).

This year China is expected to do better in terms of economic growth, which means that demands for steel will slowly increase and the once-sunken prices will stabilize. The overall consumption of steel products is anticipated to exceed 120 million mt in 2000 (+2.7% compared to 1999).

Experts point out that fewer investments in the infrastructure will slow down the demands for steel. The bulk of investments comes to hi-tech industries which consume little steel, which should undermine the demands in the long run. Perhaps, this is the reason why the Chinese executive authorities are planning to lower supplies of finished steel by some 16 million mt in 2000.

Altogether, the situation on the Chinese market can hardly be predicted. Though the market is in oversupply of steel, the new economic growth projects can sharply boost the demands. The very careful estimates indicate that consumption of steel in this country will grow by some 10 million mt in 2000-2005.

Back in 1999 China was the largest importer of Ukrainian-made rolled steel. However, the statistics on the first 2 months of 2000 prove that this situation is likely to change somewhat.

In January-February 2000 Ukraine supplied 519,500 mt (-36% less than the respective 1999 figure) of metal worth USD 85,418,000 (-19%) to China. Ukraine mainly exported semi-finished steel (267,000 mt, i.e. 51.53% of the total China-bound metal exports from Ukraine), HR flats (116,000 mt, 22.45%), CR flats (109,000 mt, 21%), and wire rods (24,450 mt, 4.69%).

Difficulties with acquiring import licenses and restrictive measures of the Chinese authorities have worsened the performance of Ukrainian exporters. Compared to the 2 months of 1999, supplies of HR sheets lost 47%, semi-finished steel -24%, and wire rod -31%. There have been no exports of Ukrainian rebars to China since the beginning of the year.

Exports of CR coils were the only ones to improve (+22% up to 109,000 mt) in the 2 months of 2000. Prices remained unaltered in the course of March 2000.

Table 10 shows the data on Chinese prices for rolled steel.

Table 10. Chinese prices for rolled products (USD/mt)

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