FERROALLOYS

FERROALLOYS

UKRAINE

Performance of Ukrainian ferroalloy producers and traders
in the first four months of 2001 evidence certain stabilization.

As compared to 2000, average monthly output of electrical
ferroalloys added minor 0.2%, which on the basis of performance results in 2000 suggests
that market reached saturation. At the same time, there was reported re-distribution of
supplies toward growing export (+8.9%) and downturn in supplies to local market (-10.8%).
Simultaneously, ferroalloy imports boosted by some 9.4% along with interior consumption of
ferroalloys reducing by 9.6%. In light of a 3.8% growth in average monthly steel output in
Ukraine, interior consumption of ferroalloys keeps going down. These may be reasoned by
rather large transfer stock of ferroalloys from metal producers.

As regards production, in January-April 2001, ferroalloy
plant of Ukraine (Nikopol, Zaporozhye, and Stakhanov) manufactured 487 ths. tons of the
commodity, which makes 130% of the respective 2000’ figure, the MetallurgProm
Association reports.

Average monthly output of ferroalloys in the four opening
months of 2001 was inclined to decrease. At the same time, Zaporozhye Ferroalloy Plant
(FP) demonstrates rather dynamic performance with a 13.4% production growth when compared
to the respective period of 2000. Lagging behind Zaporozhye FP, Nikopol FP is still 5.5%
more advanced in production of 2000. Simultaneously, Stakhanov FP lowered production
tempos, thus, production only accounts for 97.6% of 2000’ level.

It should be noted however, that ferroalloy output in April
made 116 ths. tons, which was 4.0% down from the figure in March 2001. Hence, output of
ferroalloys in January-April had the downturn tendency. In February-April, ferroalloy
production in Ukraine fluctuated within 112-117 ths. tons, which was only 84-87% of output
in January 2001.

One of the reasons behind some decrease in production and
export tempos was decline in the world steel output. According to the International Iron
and Steel Institute, aggregate production of steel in 63 countries in the first four
months of 2001 added some 0.2% as compared to the respective period of 2000 (table 1).

Steel production in April made 96.6% only of March’
figure. In the respective period, steel production downturn made 3.2% in Ukraine and 1.6%
in Russia.

Upon performance in the four opening months of 2001,
situation in regions was as follows: the largest growth in steel production was reported
in countries of the Middle East (+6.3%), whereas the largest decline occurred in North
America (-13.9%). Countries of the CIS remain with the sixth ranking place showing a 2.3%
increase in production.

As it becomes clear, the first four months of 2001 were
described with slowdown in global steel output with average monthly production accounting
for 99.1% of the 2000’ indicator.

Decline in the world steel production tempos resulted in
stagnation of the ferroalloy market. This affected dynamics of ferroalloy export from
Ukraine as well. As the presented data (diagram 1) suggests, the first signs of the
situation evolved back in the fourth quarter of 2000. Starting from the moment and up to
date, average monthly export of ferroalloys from Ukraine ranges within 70-80 ths. tons.
Considering situation analysis of the world economy, there may be suggested that some
recovery on the ferroalloy market would not happen earlier than the end of the third
quarter 2001.

In April 2001, physical export of ferroalloys from Ukraine
augmented by some 3.7% against March. By and large, similar to the first quarter 2001, as
well as in the four months, total exports accounted for 131.6% as compared to the
respective period of 2000 (diagram 1). The highest growth rate was traced in exports of
ferrosilicon (151.6%), while ferromanganese supplies added the least (102.4%).
Ferrosilicomanganese with a 39.3% increase occupies intermediate position. However, as
compared to September-December 2000’ period, export changes are not that encouraging.
Export turnover in the first four months of 2001 accounts for 101.8% of the figure in
September-December 2000. Increase was only fostered by larger supplies of ferrosilicon
(+26.3% in export). At the same time, shipments of ferromanganese and ferrosilicomanganese
accounted for 92.6% and 98.3% respectively of the similar period in 2000.

As a result, Ukraine’s export of ferroalloys in
January-April 2001 totaled 298.8 ths. tons worth USD 122.5 mln.

The structure of Ukrainian ferroalloy export in 2001
undergone changes as compared to 2000. Thus, the share of ferromanganese in 2001 shrank to
19.8% against 23.2% in 2000, whereas the portion of ferrosilicon on the opposite grew from
19.7% to 23.6%. The share of ferrosilicomanganese changed slightly coming to 55.2% in 2001
as compared to 55.4% in the previous year. Besides, the share of low-tonnage ferroalloys
in total export turnover curtailed and made 1.4% as compared to 1.7% in 2000.

By-region distribution of Ukraine’s ferroalloy export is
expanding in 2001 and presently embraces 38 countries (except for South America, Oceania,
and Australia) that purchase Ukrainian-made ferroalloys. At the same time, despite
increased number of countries that buy Ukrainian ferroalloys in 2001, concentration of
supplies per country remained at 2000’ level.

Analysis of Ukrainian ferroalloy export distribution by
regions presents the CIS as major consumer of the Ukrainian commodity with a 44.0% share
in total exports. At this, ferrosilicomanganese accounts for 52.0%, ferromanganese –
34.3%, and ferrosilicon adds 13.7%.

Among the CIS countries, the RF is a definite leader having
imported 111.2 ths. tons of ferroalloys in the four months of 2001. Within the stated
volume, ferrosilicomanganese accounts for 54.6%, ferromanganese – 34.4%, and
ferrosilicon – 11.0%.

Asian countries rank the second in consumption of Ukrainian
ferroalloys yielding a 28.0% share in total exports or 83.5 ths. tons. Supplies to this
region embraced ferrosilicomanganese (68.3%), ferrosilicon – 29.0%, as well as
ferromanganese (2.7%). The largest buyers of Ukrainian ferroalloys in the region are
Turkey (34.6 ths. tons), Saudi Arabia (20.3 ths. tons), and South Korea (12.5 ths. tons).
These three account for joint 81% in ferroalloy supplies from Ukraine to this region.

Countries of Eastern Europe (third ranking) hold 11.3% in
export of Ukrainian ferroalloys or 33.8 ths. tons. These suggest ferrosilicon (47.0%),
ferromanganese (29.7%), and ferrosilicomanganese (23.1%). The most notable buyers of
Ukrainian ferroalloys in this region are Romania (16.2 ths. tons), Poland (6.9 ths. tons),
and the Czech Republic (5.4 ths. tons) and account for the total of 84.3% in the
region’s supplies.

Situation with export of base ferroalloys in January-April
2001 was as follows.

In the period under review, ferrosilicomanganese was
supplied to 21 countries worldwide, thus, reaching the level of 2000. The largest
shipments were destined for the CIS (41.5% in total export), Asia (34.6%), and North
America (11.2%). The top five consumers of the commodity are Russia (60.7 ths. tons),
Turkey (21.5 ths. tons), South Korea (12.5 ths. tons), Canada (10.3 ths. tons), and Mexico
(7.6 ths. tons). All of these contributed the aggregate 68% to export supplies of the
commodity. Average monthly export of ferrosilicomanganese outruns the respective figure of
2000 by 8%.

Ferromanganese in January-April 2001 was forwarded to 18
countries worldwide against 15 countries registered in 2000. The leaders of Ukrainian
ferromanganese export are the CIS (76.3% in total export from Ukraine), Eastern Europe
(17.0%), and Asia (3.8%). The largest buyer of Ukrainian-made ferromanganese is still
Russia with 38.3 ths. tons or 64.8% in total export, which is followed by Romania (8.2
ths. tons) and Kazakhstan (5.1 ths. tons). The three countries accounted for the aggregate
87% in ferromanganese shipments out of Ukraine. Average monthly production of
ferromanganese dropped by 7% as compared to 2000.

Ferrosilicon was primarily exported to countries of Asia
(34.4% in total Ukrainian exports of the commodity), the CIS (25.5%), and Eastern Europe
(22.6%). Among the 28 countries that bought ferrosilicon from Ukraine, the leaders were
Turkey (12.9 ths. tons), Russia (12.2 ths. tons), Romania (7.5 ths. tons), Japan (5.6 ths.
tons), and Taiwan (3.2 ths. tons). The aggregate share of the five countries accounts for
59% of all ferrosilicon supplies from Ukraine. BY and large, average monthly export of
ferrosilicon outruns the respective 2000’ indicator by 30%.

Minor supplies of ferrochromium (9 tons) were
delivered to Russia.

The range of low-tonnage ferroalloys, which were forwarded
in January-April 2001 from Ukraine to 9 countries worldwide, saw some expansion.
Ultimately, ferroalloy supplies comprised ferronickel, ferrotungsten, ferrotitanium,
ferroniobium, and other ferroalloys. Out of 4.2 ths. tons of low-tonnage ferroalloys worth
USD 3.7 mln., ferronickel accounted for 74.1%, and ferrotitanium – 11.8%. Ferronickel
supplies were mostly bound to Germany (43% of turnover) and Estonia (39%). Major consumer
of ferrotitanium in 2001 was the Netherlands, which hold substantial share (61%) in
supplies of the commodity.

It should be noted that in 2001, import purchase of
ferroalloys grew by some 9.4% as compared to average monthly import in 2000. As a result,
ferroalloy import to Ukraine in January-April 2001 amounted to 14.1 ths. tons worth USD
15.9 mln. There were 11 European countries that supplied Ukraine with ferroalloys in the
period under review. Major supplies arrived from Latvia (10.7 ths. tons), the Netherlands
(1.0 ths. tons), and Russia (0.9 ths. tons), accounting for joint 89% in import. Among
ferroalloys shipped to Ukraine, the top import article was ferrochromium with a 48.9%
share followed by ferrosilicon – 32.1%, as well as ferrotitanium – 3.7%. At this,
low-tonnage ferroalloys (ferrosilicochromium, ferromolybden, ferrotungsten, ferrotitanium,
ferrovanadium, ferroniobium, ferrophosphor, etc) accounted for 17.1% in export turnover.

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

RUSSIA

In 2001, Russian ferroalloy producers somewhat slowed down
production tempos. According to Interfax (the State Statistics Committee of the RF), in
January-April 2001, output of ferroalloys curtailed by 7.4% as compared to the respective
2000’ period.

Decrease was registered in the RF production of
ferrochromium (60% of chromium) – to 68.9 ths. tons or 21.3%, while output of
ferrosilicon (45% of silicium) on the contrary grew by 1.8% and reached 220.7 ths. tons.
In April 2001, enterprises of Russia produced 57.1 ths. tons of ferrosilicon (FS45) and
17.4 ths. tons of ferrochromium (60%).

In January-April 2001, Chelyabinsk Electrometallurgical
Works (the RF largest producer of ferroalloys) cut production of ferroalloys by 3.1% to
186.35 ths. tons. At this, production of ferrosilicon added 0.3% up to 93.56 ths. tons,
though output of ferrochromium shrank by 22.9% to 34.67 ths. tons as compared to the
respective period of 2000. In April, the Works produced 47 ths. tons of ferroalloys, which
is 0.7% down from April 2000’ figure.

KAZAKHSTAN

According to Interfax, the European Bank for Reconstruction
and Development (EBRD) is presently considering environmental situation and projects by
Aksou Ferroalloy Plant (AFP, Kazakhstan) in order to provide credit line to back long-term
environmental programs of the enterprise. The obtained loan will be used by the
company’s management to implement long-term program for commissioning of environmentally
safe production. It is mentioned that nature-friendly activities will consume 246 mln.
tenge (KZT 1.7 mln.) as compared to 235 mln. tenge in 2000. Due to measures taken in 2000,
atmosphere waists curtailed by 5 ths. tons as compared to 1999.

GEORGIA

Merging process spreading all over the CIS also touched on
Georgia’s industry. According to Interfax, the two largest metallurgical enterprises of
Georgia (JSC ChiaTourMarganets and JSC Zestafonsky Ferroalloy Plant) have turned into one
production system.

WORLD MARKET

According to Metalbulletin.com, situation on the world
market for ferrosilicon in January-May 2001 remained rather stable. On the European
ferrosilicon market, prices for 75% ferrosilicon stick to the level of DM/t 1,060-1,100
(table 2), although some signs of steel production revival emerged in the EU (0.2%, table
2). North American market is still influenced by sizable curtailment of steel output
(-13.8%) and responds with price reduction. In late May 2001, prices for imported 75%
ferrosilicon dropped by USD/lb 0.02-0.03 (USD/t 44-66) as compared to the fourth quarter
of 2000 and reached USD/lb 0.31-0.33 Pittsburgh warehouse (USD/t 683-728). Similar
situation appears on American market for local 50% ferrosilicon. After prices had been
fluctuating at around USD/lb 0.38-0.40 (USD/t 832-882) for a long time period, in late May
prices went down to USD/lb 0.36-0.38 (USD/t 794-838). Asia’s market for 75% ferrosilicon
offers March base price in the range of USD/t 490-500 FOB Chinese ports.

Main regional markets for ferrosilicomanganese keep
evidencing ambiguous situation. If European market in January-May 2001 got stuck to the
level of DM/t 980-1,000, then American market kept boosting prices continually driving
them to USD/lb 0.22-0.23 (USD/t 485-507) in late March. In May, positive trend remained
with slight growth settling prices at USD/lb 0.225-0.23 (USD/t 496-507). Prices on Asian
market having hit the high in March began moving down in April and made USD/t 400-410 in
May.

On the world ferrochromium market, by late May 2001, there
is traced reduction in steel production tempos in the world, which drives demand for
ferrochromium down. In Europe, after March upturn (USD/lb Cr 0.32-0.38), prices for
high-carbon ferrochromium in the middle of May 2001 dropped to USD/lb Cr 0.30-0.32. On
American market, in January-May 2001 period, prices curtailed from USD/lb Cr 0.35-0.37 to
USD/lb Cr 0.31-0.33, and reduction in Asia was from USD/lb Cr 0.31-0.32 to USD/lb Cr
0.27-0.29.

In this way, world market for base ferroalloys reveals the
tendency toward stagnation period, fostered by slowdown in steel production tempos.

Vitaly GNATUSH, expert with DerzhZovnishInform

Table 1.Ferroalloy production in Ukraine, ths. tons

Source: * – UkrFA Association, ** – Metallurgprom Association

Table 2. By-region distribution of world steel
production in 2001, mln. tons