NONFERROUS METALS

NONFERROUS METALS

GLOBAL MARKET

Aluminum

June became the month of a global decline on the aluminum
market. Prices for aluminum were the lowest in the current year. Average price for
aluminum in June amounted to USD/tonne 1,466.55, which is USD/tonne 73 down from the
respective figure in the previous month. The range of price fluctuations was USD/tonne
1,437-1,495.5.

Situation on the market for aluminum alloys was a bit more
stable. The level of LME quotations for aluminum alloys was USD/tonne 40 down against the
respective figure in May 2001, and totaled USD/tonne 1,195.43. LME quotations for aluminum
alloys in June ranged between USD/tonne 1,160 and USD/tonne 1,221.

Within the month, prices for aluminum continued to fall.
Thus, a tendency to decrease in prices, which was first registered in March 2001, could be
still traced in June. In principle, today unstable prices are a usual phenomenon for this
time of year due to a seasonal factor and, besides, to problems in power complex in the
USA, Canada and Brazil. However, even an announcement by Alcan Aluminum Corp about closing
down of some productive capacities, which is coming soon, did not bring an expected
result. This just slowed the plunge of prices. Lately, the main factor affecting prices
for aluminum was unfavorable news about the level of the metal consumption in the USA and
Europe – the major aluminum consuming regions.

However, there are favorable perspectives for further
development of the situation on aluminum market. Energy crisis in Brazil, which occurred
as a result of crash of the country’s main offshore oil platform, most probably, will
lead to cutback in aluminum production in this region. Besides to that, continuing
recovery of US dollar and weakening euro, along with energy problems in the USA, gives
ground to expect that reducing stocks of aluminum on the market will power the price
increase even more than demand fluctuations.

Most probably, prices for aluminum will start growing soon,
the growth being slow, but stable, due to the aforementioned reasons, and also due to
upswing in construction of new buildings both in Europe and in the USA with simultaneous
reduction in rates of interest in these regions.

In June 2001 premiums for aluminum of CIS origin (in
Rotterdam) were the following:

– aluminum А5 – 5-10 USD/tonne;

– aluminum А6 – 10-15 USD/tonne;

– aluminum A7 – 20-25 USD/tonne.

Copper

In June 2001, prices for copper, as well as those for
aluminum, were the lowest in the current year.

Average price for copper in June amounted to just USD/tonne
1,608.45, which is down USD/tonne 74 from the respective May figure – USD/tonne
1,682.21. Quotations for copper during this month ranged from USD/tonne 1,550.6 to
USD/tonne 1,671.

Seasonal factors and active policy of investment funds
aimed at mass sale of copper stocks affected prices on the copper market. Besides to that,
stocks of semi-finished and finished copper products increased considerably due to
decrease in demand for copper.

Even cutback in production of copper concentrate at
enterprises of Phelps Dodge Corp and Kennecott Utah Copper Corp did not cause decrease in
refined copper production, since the market was overstocked. It is worth mentioning that,
according to the data with the International Group on Copper Studies, in the first half of
2001, the glut of copper at the market amounted to 120,000 tonnes. In the end of 2000,
there was a deficit of 50,000 tonnes on the market for copper, whereas in February 2001
the market already got overstocked – the glut totaled 12,000 tonnes, and in March 2001
this figure reached 50,000 tonnes.

In March 2001 copper output totaled 1,340,000 tonnes, which
is 150,000 tonnes more as compared to the respective February figure. Consumption of
copper in these months amounted to 1,290,000 tonnes and 1,180,000 tonnes respectively.

In late May consolidated stocks of LME, Shanghai Metal
Exchange and Comex totaled 641,000 tonnes, which corresponded to April figure and was
53,000 tonnes higher as compared to March figure.

The situation in the USA, which is one of the main
countries consuming copper, was the following. In June copper stocks on the US market
continued to grow, whereas demand for the commodity was relatively low. Therefore, Phelps
Dodge Corp, which is the second world largest copper producer, announced about curtailment
of copper production by the company, and Olin, one of the main producers of copper alloys,
announced layoff of 14% of its employees and further restructuring of the company.

The next month promises to be practically the same as June.
According to the leading market players, the situation on this market may start improving
only in August, when construction market becomes more dynamic.

European market was also characterized by weak demand and
lack of buyers’ interest. There were rumors on the market that, due to low demand, some
plants may extend their summer holidays until the more buoyant season.

In spite of decreasing copper stocks at main ports, Chinese
market was also dormant after the relatively active trade period.

In the middle of June premiums for copper of grade A were
the following:

CIF Rotterdam – 30 USD/tonne;

In Liverpool – 36-38 USD/tonne;

In Italy – 35-38 USD/tonne.

UKRAINE

In January-May 2001 Ukraine exported some 230,000 tonnes of
nonferrous metals and products worth USD 426,000,000, which is down 17.1% in terms of
physical volume and up 44.7% in terms of export revenues against the respective 2000’
figures. In January-May 2001, these figures totaled 278,000 tonnes and USD 295,000,000
respectively.

Copper and aluminum products in January-May 2001 accounted
for 81.6% of the total Ukrainian export of nonferrous metals in terms of physical
quantity, and 69% in terms of export revenues.

In the first five months of 2001 exports of copper and
aluminum products from Ukraine dived by almost 26% in terms of physical volume, whereas
export revenues increased by 10.5%.

Exports of nickel, lead, zinc and tin in 2001 totaled 2,800
tonnes worth some USD 3,100,000, which made up 1.22% and 0.73% in total exports in terms
of physical volume and export revenues respectively. The respective 2000’ figures
amounted to 3,500 tonnes and USD 1,780,000.

Exports of other nonferrous metals, metal ceramics and
products made of these materials in January-May 2001 rose considerably as compared to the
respective 2000’ figures. In the first five months of 2001 export of these commodities
from Ukraine totaled 32,200 tonnes worth USD 25,200,000, whereas in January-May 2000
exports were two times lower and amounted to 16,100 tonnes worth USD 15,400,000. Thus, in
the period under review exports of this commodity group surged by 100% in terms of
physical volume and by 63% in terms of export revenues. In January-May 2001, these
commodities made up 14% in terms of physical quantity and 5.9% in terms of revenues in
total Ukrainian export of nonferrous metals.

Copper

In the first five months of 2001 Ukraine exported 50,300
tonnes of copper group products worth USD 83,800,000, which is down 16.8% in terms of
physical volume and up 33% in terms of export revenues as compared to the respective
2000’ figures.

The main export items of copper group still were unrefined
copper bullions, refined copper and copper alloys.

Export of unrefined copper in January-May 2001 totaled
12,100 tonnes worth USD 20,400,000. Export of refined copper and copper alloys within this
period amounted to 34,100 tonnes worth USD 56,500,000. The portion of these commodities in
total export of copper group products made up 91.7% both in terms of physical quantity and
export revenues. Growth in exports of this subgroup (refined copper and copper alloys) in
January-May 2001 totaled 56.6% in terms of quantity and 133% in terms of currency earnings
as compared to the respective period of 2000.

Aluminum

In January-May 2001 Ukraine exported some 137,200 tonnes of
aluminum group products worth USD 210,200,000. Physical exports reduced by 38.7%, whereas
export revenues increased by 3.5% against the respective 2000’ figures.

This commodity group made up 59.7% in terms of physical
volume and 49.3% in terms of currency earnings in the total Ukrainian export of nonferrous
metals in 2001.

Primary aluminum and aluminum alloys in ingots ranked the
first in exports of this commodity group and accounted for 87.52% of the total export of
aluminum commodities. Total export of this commodity amounted to 120,000 tonnes worth USD
159,000,000.

Supply characteristics

In January-May 2001, the largest export supplies were as
follows: