FERROALLOYS

Vitaliy GNATUSH, expert with DerzhZovnishInform

UKRAINE

Manufacturing performance of Ukrainian ferroalloy producers and activity of Ukrainian ferroalloy traders in January-February 2001 can be treated ambiguously. On the one hand, average monthly indicators for ferroalloy production and exports grew by 3.3% and 11.1% correspondingly while on the other hand, domestic ferroalloy consumption shrank by 4.3%. Along with this, ferroalloy imports featured significant augmentation (+ 34.4%).

As regards ferroalloy production, according to the data with Metallurgprom Association, Ukrainian ferroalloy works (namely Nikopol, Zaporozhye, and Stakhanov Ferroalloy Works) produced 251 ths. tons of ferroalloys in January-February 2001 (see table 1), exceeding the 1999’s figures by 140%.

In 2001, average monthly production of ferroalloys distinctly grew compared to the level registered in 2000. Zaporozhye Ferroalloy Works managed to add 17% to the 2000’s figures and thus was notable for the highest rate of production growth. Stakhanov Ferroalloy Works and Nikopol Ferroalloy Works boosted monthly output by 12.4% and 5.9% respectively. However, it should be noted that in February 2001, ferroalloy production totaled 117 ths. tons, which was 12.7% less than in January 2001.

Such decline seems to be stipulated by global curtailment of steel output, which also embraced Ukraine. According to the data with the IISI, in the first two months of 2001 overall steel output in 63 countries worldwide dropped by 0.1%, compared to the respective period of 2000. What is more, in February 2001 steel output plunged by 5.6 mln. tons (-8.1%) against January 2001. Ukraine featured similar downward tendency: in February 2001, steel output made up 96% compared to the figures registered in January. The same situation is traced in Russia. In February 2001, Russia produced 4.28 mln. tons of steel compared to 4.75 mln. tons in January 2001. In our opinion, such curtailment of steel production in Russia (-9.9%) will have far-reaching implications.

In the first two months of 2001, situation in different world regions was notable for its diversity: South America saw the record-high augmentation of steel output (+ 7.5%) while the most severe slowdown was registered in Oceania (- 13.1%) (see table 2). CIS member states hold the middle reporting a 2.3% increase of steel output.

In 2001, general augmentation of steel output seemed to feature certain slowdown compared to the 2000’s figures since its increment totaled only 7.4%. However, such situation is far from being extraordinary since functional dependence of economic development consists in complicated combination of helix and sine curve. In such circumstances, looking for the most reliable forecast turned into the matter of paramount importance.

Worsening economic situation on ferroalloy market negatively affected Ukrainian ferroalloy exports.

In February 2001, ferroalloy exports from Ukraine made up 86.5% of that reported in January 2001. Ferromanganese (70.7% compared to the figures registered in January) and ferrosilicon (74.2%) suffered from the most severe curtailment of export supplies. Along with this, overall ferroalloy exports from Ukraine grew by 37.8% compared to January-February 2000 (Diagram 1).

Diagram 1. Dynamics of Ukrainian ferroalloy exports in 1999-2000

In 2001, ferrosilicon exports witnessed the highest growth rate against the respective period of 2000 (by 160.7%). Exports of ferrosilicomanganese and ferromanganese grew insignificantly (122.5% and 135.5% correspondingly). However, in January-February 2001 total export supplies recovered by meager 1.4% compared to November-December 2000, which clearly indicates the forthcoming lowering of ferroalloy trade.

In general, Ukrainian ferroalloy exports in January-February 2001 totaled some 152.4 ths. tons worth USD 62.3 mln.

In 2001, pattern of ferroalloy exports from Ukraine featured certain changes compared to what had been reported in 2000. Ferromanganese contributed 18.9% to the total against 23.2% in 2000. On the contrary, share of ferrosilicon increased from 19.7% to 24.1% while exports of ferrosilicomanganese went up insignificantly (55.6% in 2001 compared to 55.4% in 2000). Besides, low-tonnage ferroalloys accounted for 1.4% of the total ferroalloy exports, which is less than in 2000 (-1.7%).

Regional distribution of Ukrainian ferroalloy exports in 2001 remains comparatively broad and embraces 32 countries representing four continents with an exception for South America, Oceania, and Australia. Along with this, export concentration per country increased by approximately 18%, as compared to the 2000’s level.

As regards distribution of Ukrainian ferroalloy exports by regions, CIS countries remain the leading consumers of Ukrainian ferroalloys accounting for 43.4% of Ukrainian exports.

Being the unrivaled leader in consumption of Ukrainian ferroalloys among the CIS member states, the Russian Federation imported some 56.7 ths. tons of this commodity in the first two months of 2001 including ferrosilicomanganese (59.3% of the total), ferromanganese (31.7%), and ferrosilicon (8.9%).

Asia became the second largest importer of Ukrainian ferroalloys contributing 28.4% to the total Ukrainian exports. Ferroalloy exports to Asia consisted of silicomanganese (60.1%), ferrosilicon (35.9%), and ferromanganese (3.9%). The largest amounts of Ukrainian ferroalloys were purchased by Turkey (18.4 ths. tons), Saudi Arabia (10.3 ths. tons), and Japan (7.9 ths. tons).

Eastern Europe ranked the third in consumption of Ukrainian ferroalloys making up 12.2% of the total ferroalloy exports. For the most part, East European countries imported ferrosilicon (41.2%), which was followed by ferrosilicomanganese (26.5%) and ferromanganese (32.2%). Romania (8.5 ths. tons), and Poland (4.8 ths. tons) consumed the largest portions of Ukrainian ferroalloy exports.

The year 2001 saw the following distribution of basic ferroalloy exports from Ukraine.

In 2001, ferrosilicomanganese was supplied to 18 countries worldwide compared to 21 countries that exported this commodity in 2000. CIS countries and Asia hold the leadership in consumption of Ukrainian ferrosilicomanganese accounting for 44.5% and 30.8% of Ukrainian exports correspondingly. Russia (33.6 ths. tons), Turkey (10.3 ths. tons), Canada (5.2 ths. tons), Japan (4.9 ths. tons), and Egypt (3.5 ths. tons) were the five largest importers of this commodity together making up 68% of Ukrainian exports. It should be noted that average monthly export of ferrosilicomanganese exceeded the 2000’s figures by approximately 11%.

In 2001, ferromanganese was supplied to 12 countries worldwide, compared to 15 countries engaged in ferromanganese imports in 2000. Speaking of regional distribution, the CIS (72.9% of the total) and East European countries (20.8%) remained its largest importers. As regards export distribution by countries, Russia spurred up to become the leading consumer of this commodity (18.0 ths. tons) and was followed by Romania (5.2 ths. tons) and Kazakhstan (2.2 ths. tons). Average monthly exports of ferromanganese featured a 9% curtailment against the 2000’s figures.

Ferrosilicon was exported to Asian countries (42.3% of the total), Eastern Europe (20.7%), and CIS member states (20.4%). Turkey (7.8 ths. tons), Russia (5.0 ths. tons), Romania (3.3 ths. tons), Japan (3.0 ths. tons), and the USA (2.8 ths. tons) were notable for the largest amounts of imported ferrosilicon among 21 countries that consume this commodity. Together they accounted for 60% of Ukrainian exports. On the whole, average monthly exports of ferrosilicon grew by 36%, as compared to the 2000’ figures.

Insignificant amounts of ferrochrome were supplied to Russia (3 tons).

The assortment of low-tonnage ferroalloys exported from Ukraine to 6 countries worldwide distinctly narrowed (compared to the one reported in 2000) and embraced only ferronickel and ferrotitanium.

Ferronickel (91%) and ferrotitanium (9%) contributed the most to the total exports of low-tonnage ferroalloys that amounted to 2 ths. tons. For the most part, ferronickel was exported to Germany (19%) and Estonia (64%). The Netherlands turned into the leading consumer of ferrotitanium (57%) among 4 countries engaged in ferrotitanium imports in 2001.

It is worth mentioning that in 2001, ferroalloy imports augmented by 34% against the average monthly figures registered in 2000. As a result, in January-February 2001 Ukrainian imports of ferroalloys totaled 8.6 ths. tons worth USD 8.7 mln. During the period under review, 10 European countries supplied their ferroalloys to Ukraine. Latvia, the Netherlands, and Russia became the leading importers of ferroalloys accounting for 87.2% of Ukrainian imports. Ferrochrome (48.0%), ferrosilicon (31.9%), and ferrosilicomanganese (2.9%) contributed the most to the total Ukrainian imports of ferroalloys. Along with this, low-tonnage ferroalloys (including ferrosilicochrome, ferromolybdenum, ferrotungsten, ferrotitanium, ferrovanadium, ferroniobium, ferrophosphorus and others) made up 17.1% of the total.

Kazakhstan

Interfax agency informed that in January-February 2001, multinational corporation Kazchrome (Kazakhstan) boosted its ferroalloy production by 26.2% (up to KZT 9.4 bln.) against the respective period of 2000.

Kazchrome multinational traces its roots back to 1995 when Aktyubinsk Ferroalloy Works (currently JSC Ferrochrome), Ermakovskiy Ferroalloy Works (currently Aksu Ferroalloy Works) and their chrome-ore deposit (namely JSC Donskoj Ore-Mining and Processing Works located in Aktyubinsk region) were transformed into the one joint-stock company.

Such merger aimed at unified investment, technical, and marketing policy carried out to recover and develop existing productive capacities dealing with mining and processing of chromium iron ore and production of ferroalloys.

At present, Kazakhstan Mineral Resources Corporation (KMRC) owns 28.75% of Kazchrome’s shares compared to 31.37% belonging to the state.

In the first two months of 2001, JSC Donskoj Ore-Mining and Processing Works extracted 276.6 ths. tons of chromium iron ore, which abridged the figures reported in respective period of 2000 by 32.1%. Along with this, ferrochrome revenues amounted to KZT 1.3 bln. making up 14% of the total Kazchrome’s earnings.

Interfax agency informed that in January-February 2001, overall ferroalloy output dropped by 9% compared to the one registered in respective period of 2000. Summarized data on manufacturing performance of Kazakhstan ferroalloy works in January-February 2001 are shown in table 3.

In 2001, ferroalloy production in Kazakhstan evidenced distinct downward tendency. At the same time, in 2002 JSC Ferrochrome plans to launch new workshop (worth USD 20 mln.) engaged in production of high-carbon ferrochrome.

GLOBAL MARKET

In 2001, prices on global market for basic ferroalloys were notable for their peculiarity (table 4).

Due to forthcoming downward tendency in world output of steel, global ferroalloy market featured lowering demand for basic ferroalloys. By the end of March 2001, such situation stipulated certain curtailment of ferroalloy prices on a number of regional markets.

Since the beginning of 2001, European market for ferrosilicon remained quite stable. Starting from January 5, 2001 prices for 75%-ferrosilicon were floating within DM/ton 1,060-1,100 compared to DM/ton 1,080-1,100 registered in December 2000. However, such situation seems to be temporary since in February 2001, steel output in the EU shrank by 5%. In March 2001, prices set on American market for 75%-ferrosilicon featured no serious fluctuations and remained at the level registered in the fourth quarter of 2000 (USD/lb 0.34-0.35 Pittsburgh). In February 2001, Asian market for 75%-ferrosilicon was notable for its stability (USD/ton 495-500 FOB major Chinese ports). However according to the data with Reuters, Asian market underwent significant changes in March 2001. In the first ten days of March 2001, prices for Chinese-made 75%-ferrosilicon fluctuated within USD/ton 480-485 while in the second ten-day period they dropped to USD/ton 475. What is more, prices for ferrosilicon exported to India and Indonesia fell to USD/ton 465-475.

In January-February 2001, European and American markets for ferromanganese, up to 7.5% carbon content, remained quite stable. Currently, prices for ferromanganese on these markets amount to DM/ton 960-1,000 and USD/lt 460-475 correspondingly. Trying to speculate for the rise, in March 2001 Asian ferromanganese market boosted its prices by USD/ton 5 (compared to those registered in January 2001) and reached the high of USD/ton 385-395. As a result, ferromanganese prices approached the average annual level reported in 2000.

Situation on regional constituents of global market for ferrosilicomanganese was notable for its ambiguity. Since the end of 2000, prices on European market were quite stable (DM/ton 980-1,000) while positive trends on American market for ferrosilicomanganese resulted in gradual cutback of prices down to USD/ton 463-507 Pittsburgh, i.e. prices in March 2001 went down to reach the level of August 2000. On the contrary, Asian market was constantly seeking for stability: since the beginning of 2001 till the first ten days of March, prices slowly drifted towards USD/ton 415-425. At the same time, Reuters insisted that traders were operating only with those prices that fluctuated within USD/ton 405-420 FOB, which in a week even lowered to USD/ton 390-415 FOB.

In the first months of 2001, global market for ferrochrome featured ambiguous tendencies as well. In march 2001, prices on European market for ferrochrome, up to 6-8% carbon content, augmented to USD 0.32-0.38 per pound Cr compared to USD 0.29-0.38 per pound Cr in January 2001. Currently, this market evidences quite opposite tendencies. With their record-high reported in April 2000 (USD 0.39-0.43 per pound Cr), prices for ferrochrome gradually went down to reach USD 0.34-0.37 per pound Cr in March 2001. Prices for high-carbon ferrochrome sold on Asian market undergo similar transformation. Starting from September 2000 (the record-high of USD 0.32-0.38 per pound Cr FOB), prices for this commodity were moving down ever since and amounted to USD 0.29-0.30 per pound Cr FOB in March 2001.

Situation on global market for low-tonnage ferroalloys directly depends on steel output. Thus, price tendencies on these markets were quite similar, which also served as confirmation for forecasts made earlier.

Table 1. Production of ferroalloys in Ukraine, ths. tons

Sources: * UkrFA, ** Metallurgprom Association.

Table 2. World production of steel in 2001

Table 3. Performance of Kazakh ferroalloy plants in 2001

Table 4. Average monthly prices on the world market for base ferroalloys

Sources: MBR “Ferroalloys Monthly”, metalbulletin.com