At the beginning of March, the Ukrainian Association of Ferrous Metallurgical Enterprises held a meeting on the problem of supplies of small-tonnage (light) ferroalloys to metallurgical and machine-building enterprises for their production needs.
FERROALLOYS FOR BOEINGS
FERROALLOYS FOR BOEINGS
At the beginning of March, the Ukrainian Association of
Ferrous Metallurgical Enterprises held a meeting on the problem of supplies of
small-tonnage (light) ferroalloys to metallurgical and machine-building enterprises for
their production needs.
“Development Conception of the Ukrainian
mining-and-metallurgical sector for the period until the year 2010” set the task of
providing metal producers with new types of ferroalloys, which has now become especially
topical for producers of light ferroalloys, because an augmentation of alloyed and
stainless steel output presumes a growth of demand namely for light-ferroalloy products.
The pattern of ferroalloy production and consumption by
Ukrainian metal-makers was formed during the Soviet period and remains similar to that
today. Now, a systemic diversification of this pattern is highly needed. This also
concerns raw supplies, because light ferroalloy production largely depends on foreign
sources of raw materials. Only production of ferrotitanium and silicozirconium
(represented in Ukraine by Volnogorskiy Mining-and-Metallurgical Integrated Mill and
Irshanskiy Mining-and-Processing Complex) can be considered independent of foreign
supplies. Mining of the explored molybdenum, tungsten, and niobium deposits can be highly
promising in Ukraine. Still, during establishment of truly independent light ferroalloy
production in Ukraine, the primary task should be pursuance of well-grounded state policy
aimed at support of domestic ferroalloy producers.
A number of Ukrainian enterprises are engaged in light
ferroalloy production. The most prominent among them is chemical-and-metallurgical mill
OJSC Ilyicha Metallurgical Mill, earlier known as Donetsk Chemical-and-Metallurgical
Plant. This enterprise has a long history of work within the structure of the Soviet
military industry, when it made especially pure metals (titanium, hafnium, niobium,
vanadium) and accounted for 45% of the USSR’s aggregate output of semiconductor-purity
polycrystalline silicon. In 1993, the enterprise launched production of light ferroalloys.
The number of alloys produced is now 40, among which there are unique ones.
The mill’s potential output is capable of fully meeting
the demand of the Ukrainian metal industry for ferroalloys based on noble metals. However,
owing to a lack of orders, only 12% of the mill’s productive capacities are now used. At
the same time, the existing domestic demand for ferroalloys in Ukraine is covered by
imports. In particular, as regards ferromolybdenum, the country’s aggregate output
capacities are 1,165.7 tonnes a year, whereas in the first 10 months of 2000, Ukraine
produced only 161 tonnes of this alloy and imported 1,065 tonnes. Ferrotungsten:
productive capacity – 1,250 tonnes, actual output – 54 tonnes, imports – 94 tonnes.
Ferrovanadium: productive capacity – 833 tonnes, actual output – 104 tonnes, imports
– 953 tonnes.
In the first 10 months of 2000, as a consequence of light
ferroalloy imports, which negatively affected domestic light ferroalloy production, the
total loss incurred to the State budget added to UAH 6.8 million. At the same time, USD
5.7 million was withdrawn from the country’s hard-currency turnover for purchases of the
indicated ferroalloys from abroad. Proceeding from these figures, OJSC Ilyicha
Metallurgical Mill, which includes the Chemical-and-Metallurgical Plant, addressed the
Ukrainian Association of Ferrous Metallurgical Enterprises with a request to initiate an
appeal to the Cabinet of Ministers with a suggestion to impose limitations on imports of
the above-mentioned ferroalloys, because, in their opinion, import of the indicated
ferroalloys to Ukraine is unreasonable and does damage to the Ukrainian economy.
In order to clarify and single out the factors that
restrain production development at the Chemical-and-Metallurgical Plant, the participants
of the meeting analyzed the situation and voiced their opinions on the issue.
The quality of Ukraine-made ferroalloys based on noble
metals is level with imported ferroalloys, which is proven by the fact that the plant’s
products are now mainly exported and used in construction of Boeing aircraft. However,
even knowing about such high quality indicators of Ukrainian light ferroalloys, domestic
consumers prefer to buy from foreign suppliers, because they quickly adjust their offered
prices in response to changes in the market situation and have a more flexible and dynamic
style of business cooperation.
Another negative factor is the absence of active
advertising campaign organized by producers and aimed at promotion of Ukrainian
ferroalloys to foreign markets.
Imperfection of the law on VAT repayment is yet another
significant obstacle to active sales of noble ferroalloys on the domestic market. The
Ukrainian consumer has to choose between two schemes: either to compensate VAT to the
Ukrainian producer with a money payment during the purchase, or to owe the same amount to
the State in the case of import. In the second case, the buyer can later write off the
indebtedness to the State in accordance with a set-off scheme, thus, in most instances, he
chooses this option. As a result, it is the foreign manufacturer who benefits from this
situation, because his products actually become 20% less expensive to the Ukrainian buyer.
It is obvious that such a problem cannot be resolved solely
by the industry’s representatives. It is impossible to expect high competitive capacity
of Ukrainian products without the corresponding legislative changes.
On the other hand, a number of participants had an opinion
that imposing of new protectionism sanctions may result in unexpected consequences for
Ukrainian metal exporters rather than support Ukrainian noble ferroalloy producers.
The concluding joint opinion was to adjourn the meeting,
because this problem must be discussed by a wider range of participants. Thus, it is
necessary to convoke as many of them as possible for discussion and taking the final
decision on the issue.
COMMENT
Viktor SHEPEL, deputy technical director on
chemical-and-metallurgical production of OJSC Ilyich Iron and Steel Works of Mariupol
The global market for noble ferroalloys has been highly
unstable in the past several years, which, in turn, has resulted in significant
fluctuations of prices for ferrous metals as well. However, if we consider the enterprises
oriented to the domestic market, it is possible to conclude that the world markets’
variations affect them significantly less and so are the negative consequences of such
instability. A similar, even more illustrative, situation is observed on the Russian
market too.
If Ukrainian noble ferroalloy producers operated normally,
the price fluctuations on the internal market would be insignificant and easily
predictable. It is sufficient to say that in 1999, the variations of selling prices at the
primary Russian ferroalloy producer – Chelyabinsk Electrometallurgical Complex – were
15-20% less than the global market’s fluctuations and occurred on average 4 to 6 months
later, which smoothened the negative affect that could have been made on ferrous industry
otherwise.
The leading positions on world ferroalloy markets are held
by Chinese companies, which, united into associations and supported by the State, are able
to dictate their policy on the market. Russia, with its own sufficient sources of raw
materials and the market for its ferroalloys, can temper China’s tough regulation of the
global market.
At present, the situation on the Ukrainian noble ferroalloy
market is as follows.
According to data with Derzhzovnishinform, the Ukrainian
metallurgical sector is now importing a significant quantity of noble ferroalloys, thus
investing hard-currency assets in other countries’ economies and creating workplaces
there.
Ukrainian companies are not ready for price fluctuations on
the global market. Neither are they ready for consequences of price jumps, namely, for
absence of a product on the market, which was illustrated by a recent upsurge of prices
for ferrotungsten. At that moment, 4 enterprises concurrently addressed us with orders for
ferrotungsten.
The present technological level of Ukrainian ferroalloy
manufacturers has enabled them to make all GOST ferroalloys (i. e. those set by the State
Standard), any ferroalloys with specific parameter deviations from the figures set in
GOSTs, etc.
Our integrated mill’s capacities can be expanded more
than twofold in less than a year.
In addition to the mentioned ferroalloys, the enterprise
has launched over 40 additional alloys. As a matter of fact, the mill is capable of
manufacturing an alloy of any required composition with the set contents of alloying
elements.
Silicocalcium production is in the development stage at the
moment.
The key problem of light ferroalloy production in Ukraine
is raw supplies (since the country has no raw materials required for light ferroalloys),
however, there are a number of ways out. As soon as a stock of orders for these products
is formed, we will resolve the problem of raw-material supplies.
In addition, the company’s specialists have been
successful in tackling the problem of utilization of waste formed in a number of Ukrainian
industries in ferroalloy production. For example, the mill now processes
molybdenum-containing waste accumulated at lamp-producing plants and further uses the
recycled materials in ferromolybdenum production. Another promising direction is
reprocessing of vanadium-containing slag and ash for ferrovanadium production. Similar
research will be done into the possibility of utilization of cyclone-furnace dust and
niobium-containing slag in ferroniobium production.
However strange it may sound, owing to the lack of orders
from domestic consumers, most of the products made by the chemical-and-metallurgical plant
are now exported.
The production and technological parameters of the plant
indicate that it is capable of fully meeting the demand of the Ukrainian metallurgical
sector in noble (low-tonnage) ferroalloys.