Production, export, import, and consumption of ferrous flat rolled products and forecast for 2001

ROLLED PRODUCTS

Production, export, import, and consumption of ferrous flat rolled products and forecast for 2001

Taras BEN, State Metallurgy Academy of Ukraine, Dnepropetrovsk,

Alexander YATSENKO, OJSC Zaporozhstal, Zaporozhye

For Ukrainian producers of ferrous flat rolled products, the year 2000 was marked with production growth up to 8.34 mln. tons, which was mainly fostered by a 0.95 mln. ton increase in export turnover. Interior demand added 338 ths. tons, thus, raising import of the commodity by 163 ths. tons. Hence, Ukrainian producers managed to meet growth by 175 ths. tons only (see tables 1, 2, 3, and 4).

Table 1. Output of flat steel in Ukraine, ths. tons

Table 2. Export of flat steel from Ukraine, ths. tons

Table 3. Import of flat steel to Ukraine, ths. tons

Table 4. Interior consumption of flat steel in Ukraine, ths. tons

By-region distribution of Ukrainian supplies of flat rolled metal experienced no changes. China and Turkey are still the leaders (diagram 1).

As compared to June 2000, export prices for flat rolled products from Ukraine augmented to USD/t 225 and USD/t 335 FOB the Black Sea for HR and CR flat steel respectively. In the second half of 2000, there was registered reduction of export prices for these articles (diagram 2). The dynamics followed global trends of diminished purchase prices on world markets (diagram 3).

Flat rolled product prices on the interior market of Ukraine saw less crucial changes than export prices did. Minor price drop in July was fueled by increased shipments by domestic producers to the interior market, whereas the downturn in November–December implied the end of repair and construction season in Ukraine (diagram 4).

Enterprises of ferrous metallurgy have been major long-term sources of revenues for the state. Metal mills have been recently oriented at export of output; thus, production volume was dependent on situation on international markets (diagram 5).

Starting from 1994, when the interior market for flat rolled products was virtually absent, production dynamics was directly bound to changes of crude oil prices (Brent). The year 1997 was the only exception, when oil price decline was accompanies with increased production. In 1995-1996, interior consumption at countries-importers of Ukrainian-made flat rolled products went up due to increased prices for crude oil. Lowering of prices in 1997 failed to significantly effect dropping demand on the interior market due to accumulation of cash obtained in 1995-1996. For this reason, export of the Ukrainian flat rolled products grew by 835 ths. tons; thus, letting domestic producers to boost output by 14%.

The situation has changed in 1998. On-going even decrease of oil prices cut export and consequently production of flat rolled products. The decline occurred because local markets of countries-importers failed to withstand long-term down movement of oil prices and accumulated interior cash reserves ran out. Should production of flat rolled products in 1997 diminish by the same rate as did oil prices and keep the trend till 1998, theoretical output in 1998 would be approximately equal with actual production.

As compared to 1998, oil prices in 1999 dropped by USD/barrel 0.06 on average. Theoretical output of flat rolled products was to head down. And this is evidenced by decreased buyer’s demand on the local market. However, because of the experiment with privileged taxation of enterprises within ferrous metallurgy, competitiveness of the Ukrainian-made flat rolled products on the international market increased, which encouraged export of the article and laid grounds for a flare of antidumping investigations against Ukrainian producers.

Auspicious situation on the oil market since late 1999 till mid-2000 fostered Ukraine not only to boost export of flat rolled products, but also to start reviving of consumers on the interior market. This mainly reflected at performance of tube producers (+40.7% in output), which are the main consumers of flat rolled products on the interior market.

In July 2000, the outlined trend of oil prices decline cut export prices for flat rolled products and also had its effect on export turnover (diagram 6).

According to international experts, average prices for crude oil Brent in 2001 will come to USD/barrel 24.0-24.5 and will further go down. Annual drop will average 10-11%.

Ukrainian producers are likely to see the events of 1997 repeating. Reduction of crude oil prices in 2001 will not effect interior consumption of flat rolled products in countries – importers of the Ukrainian commodity. Funds, which were accumulated during increase of oil prices (1999-2000), will keep consumption demand in these countries in the course of 2001.

In 2001, there is expected growth in output of flat rolled products (up to 9.5 mln. tons), which will be called forth by increased consumption of Ukraine’s interior market (diagram 7). In January 2001, Ukraine’s output of flat rolled products totaled 766.8 ths. tons, which is 1% up from the respective figure of December 2000 and 26% up from January 2000′ indicator.

According to long-term tendency of oil price influence on export of flat rolled products, shipments abroad should theoretically increase by nearly 1 mln. tons of flat rolled steel. However, considering financial crisis in Turkey, which is among the leaders in consumption of Ukrainian-made rolled products, export supplies will be redirected and will increase to 6.8 mln. tons.

Import of flat rolled products to Ukraine should make no more than 60 ths. tons.

Taking into account forecasts, interior consumption of ferrous rolled products in Ukraine will total 2.7-2.8 mln. tons.

Diagram 1. By-region distribution of Ukrainian export of ferrous flat rolled products in 2000

Diagram 2. Dynamics of the CIS export prices for flat rolled products in 2000 FOB the Black Sea

HR flat steel

CR flat steel

Diagram 3. Dynamics of world prices for flat rolled products, USD/mt

HR flat steel 4-mm thick

HR flat steel 2-mm thick

Diagram 4. Dynamics of regional prices for HR flat steel on Ukraine’s interior market, UAH/t, VAT included

Diagram 5. Percentage of export in Ukraine’s output of flat rolled products

Diagram 6. Dynamics of export prices for Ukrainian flat rolled products in 2000 FOB the Black Sea

Diagram 7. Output of flat rolled products in Ukraine