FERROALLOYS

FERROALLOYS

UKRAINE

Performance of Ukrainian ferroalloy producers and traders
in the first 5 months of 2001 indicated certain stability in production and trade.

Average monthly output of electro-ferroalloys added 2.2% in
the report period in comparison with the figure registered in the last year’s
corresponding period, whereas exports increased 12.2%. At the same time, a tendency
towards a curtailment of ferroalloy supplies to the domestic market remained prominent
(- 10.6%). Along with that, ferroalloy import supplies added approximately 18.8%,
which was accompanied by a rough 8.9% curtailment of domestic consumption of ferroalloys.
Over the report period, steel output in Ukraine added 7.7%.

In January-May 2001, Ukrainian ferroalloy plants (Nikopol,
Zaporozhye, and Stakhanov) produced 621,000 tonnes of ferroalloys, which was equal to some
125% of the last year’s corresponding period’s output, according to data with
Metallurgprom Association. It is noteworthy that in comparison with the last year,
Zaporozhye Ferroalloy Works augmented its monthly production by 15.3%, and Nikopol
Ferroalloy Works – by 7.8%. Stakhanovskiy Ferroalloy Works was able to increase its
output to reach the last year’s figures.

It should be pointed out that the country’s ferroalloy
output in May 2001 came to 130,000 tonnes. It was approximately 12% higher than the April
figure. Moreover, in May, Ukrainian ferroalloy producers nearly reached the highest
monthly output in the current year, which was reported in January (134,000 tonnes),
whereas in February-April, the country’s ferroalloy output was within the limits of
112,000-117,000 tonnes a month.

Strange as it may seem, one of the reasons for such a
stabilization of production and export of Ukraine-made ferroalloys is, in our opinion, a
curtailment of global steel production. We suppose that Ukrainian ferroalloy traders were
able to optimize their sales on the foreign markets in the report period. According to
data with IISI, the aggregate steel output in 63 countries worldwide reduced by 0.2% in
the first 5 months of the current year against the figure registered in the last year’s
respective period (Table 1).

At the same time, global steel output in May increased to
add up to 101.5% of the April figure. Over the same period, steel production in Ukraine
added 5.9% and that in Russia augmented by 9.1%.

According to the figures reported in the 5 months of the
current year, the situation in regions looks as follows. Middle Eastern countries
exhibited the most prominent steel production growth (+7.6%), whereas Oceania – the
worst downfall (- 14.6%). CIS countries improved their situation climbing to rank 5 among
the world’s regions with a 2.9% growth of steel output.

As we can see, the period of January-May 2001 indicated a
slowdown in global steel production: the average monthly steel output worldwide was equal
to 99.8% of the average figure for the year 2000.

The slowdown of steel production rates around the world
caused some sluggishness on the market for ferroalloys. This situation continued producing
effect on Ukrainian ferroalloy export dynamics (Figure 1). In January-April 2001, the
average monthly export of ferroalloys from Ukraine was within 70,000-80,000 tonnes, and it
was only in May that this figure went up to 86,000 tonnes.

In May 2001, physical ferroalloy exports from Ukraine
increased by approximately 16% against the April figure. On the whole, over the first 5
months of the current year, the country’s physical export of ferroalloys was equal to
123.9% of that in the last year’s respective months (Figure 1). Ferrosilicon exhibited
the highest export augmentation (147.7% of the last year’s exports), whereas
ferromanganese indicated the lowest increment (101.6% of 2000’ figure).
Ferrosilicomanganese is in between with a 26.1% growth of its physical exports.

However, in comparison with the period of August-December
2000, current ferroalloy export figures look less optimistic. Aggregate ferroalloy exports
from Ukraine in the first 5 months of the present year were equal to only 102.8% of the
exports in the last 5 months of the previous year. Moreover, this meager increment was
reached solely due to an increase in ferrosilicon export supplies (+23.3%), whereas
ferromanganese and ferrosilicomanganese exports in the report period came respectively to
only 94.0% and 99.5% of the figures reported in the indicated period of 2000.

Thus, Ukraine’s ferroalloy exports in January-May 2001
totaled 385,000 tonnes worth USD 158 million.

The structure of the country’s ferroalloy exports in 2001
changed in comparison with the last year. For example, the share of ferromanganese reduced
to 20.4% in the current year against 23.2% in 2000 and that of ferrosilicomanganese – to
54.8% against 55.4% in 2000. On the other hand, the share of ferrosilicon in Ukraine’s
ferroalloy exports increased from 19.7% in the previous year to 23.1% in 2001. It should
be pointed out that the share of light (small-tonnage) ferroalloys gradually increased to
reach the last year’s level of 1.7% at the end of the report period.

The geographical distribution of Ukrainian ferroalloy
exports expanded gradually in 2001 and in the first 5 months of the current year, 39
countries of four continents purchased Ukrainian ferroalloys. It is remarkable that along
with the increase of the number of buyers of Ukraine-made ferroalloys, the concentration
of supplies per country lowered by 2% in comparison with the last year.

Analysis of geographical distribution of Ukrainian
ferroalloy exports indicates that just as before, CIS countries are the primary consumers
of these products accounting for 45.9% of the aggregate Ukrainian exports. Of this
quantity, ferrosilicomanganese accounts for 53.6%, ferromanganese – for 33.8% and
ferrosilicon – for 12.1%.

Among the CIS countries, Russia is the permanent leader: it
imported 150,700 tonnes of ferroalloys from Ukraine in the first 5 months of 2001.
Ferrosilicomanganese accounted for 56.3% of these supplies, ferromanganese – for 33.9%,
and ferrosilicon – for 9.1%.

Asian countries rank 2 in terms of consumption of
ferroalloys made in Ukraine accounting for 25.9% of the total Ukrainian exports, which is
equal to 99,900 tonnes. In Ukraine’s ferroalloy supplies to this region,
ferrosilicomanganese accounts for 68.6%, ferrosilicon – for 26.5%, and ferromanganese
– for 4.9%. The largest Asian buyers of Ukrainian ferroalloys are as follows: Turkey
(43,300 tonnes), Saudi Arabia (20,300 tonnes), Japan (15,100 tonnes), and South Korea
(12,500 tonnes). These four countries collectively account for approximately 91% of
ferroalloy supplies to this region.

The share of East European countries (rank 3) is equal to
10.4% of the total Ukrainian ferroalloy exports (or 39,900 tonnes in quantitative
expression). Ferrosilicon accounts for 46.0% of this quantity, ferromanganese – for
30.9%, and ferrosilicomanganese – for 22.9%. The largest purchases of Ukrainian
ferroalloys in this region were made by Romania (19,800 tonnes), Poland (7,900 tonnes),
and the Czech Republic (5,800). These three covered 83.9% of Ukrainian ferroalloy exports
to this region in the report period.

The situation with basic ferroalloy exports from Ukraine in
January-May 2001 was as follows.

In the indicated period of 2001, ferrosilicomanganese was
supplied to 21 countries worldwide. This number is equal to the last year’s number of
buyers of this commodity. It was mostly exported to CIS countries (44.9% of the total),
Asian countries (32.5%), and North American countries (10.1%). Five largest consumers of
Ukrainian ferrosilicomanganese were Russia (84,900 tonnes), Turkey (28,600 tonnes), South
Korea (12,500 tonnes), Canada (10,300 tonnes), and Mexico (7,600 tonnes). The leaders
collectively purchased 68% of all ferrosilicomanganese exported from Ukraine. It should be
noted that the current average monthly export of this ferroalloy 11% exceeds the last
year’s average figure in the respective period.

Ukraine sold ferromanganese to 18 countries in the report
period, as compared with 15 countries in 2000. The leading regions in ferromanganese
purchases were the CIS (75.9% of the total), Eastern Europe (15.7%), and Asia (6.2%). Just
as before, Russia was the primary consumer of Ukraine-made ferromanganese (51,000 tonnes
or 64.9% of the total exports) followed by Romania (9,900 tonnes) and Kazakhstan (6,600
tonnes). These three countries together accounted for 86% of the total Ukrainian
ferromanganese export supplies. In comparison with the respective period of 2000, average
monthly export of ferromanganese from Ukraine curtailed by approximately 1%.

Ferrosilicon was largely exported to Asian countries (29.8%
of the total physical exports), CIS countries (24.0%), and East European countries
(20.6%). Among the 28 buyers of this commodity, the most prominent consumers were Turkey
(14,600 tonnes), Russia (13,700 tonnes), Romania (9,400 tonnes), Japan (5,800 tonnes), and
Taiwan (3,200 tonnes). The aggregate share of these five countries in Ukraine’s total
ferrosilicon exports was roughly equal to 52%. Average monthly export of ferrosilicon in
the current year exceeded the last year’s figure by some 32%.

Ferrochromium was supplied only to Russia in insignificant
quantity (9 tonnes).

The assortment of light (small-tonnage) ferroalloys
supplied by Ukraine to 10 countries over January-March 2001 was rather varied. Exported
light ferroalloys included ferronickel, ferrotungsten, ferrotitanium, ferroniobium, and a
number of other alloys. Altogether, around 6,400 tonnes of ferroalloys of this group worth
USD 4.9 million were exported from Ukraine in the report period. Ferronickel accounted for
81.0% of this amount and ferrotitanium – for 9.6%. Germany and Estonia were the largest
consumers of Ukrainian ferronickel accounting for 45% and 39% of the total export supplies
respectively. The Netherlands is the main buyer of Ukrainian ferrotitanium this year (65%
of Ukraine’s total exports).

It is remarkable that in 2001, ferroalloy imports to
Ukraine jumped 19% in comparison with the average monthly figure of the last year. As a
result of this tendency, Ukraine imported around 19,000 tonnes of ferroalloys in the first
5 months of 2001 for the total sum of USD 21.6 million. In this period, 12 European and
Asian countries supplied ferroalloys to Ukraine. The largest batches were purchased from
Latvia (14,000 tonnes), the Netherlands (1,500 tonnes), and Russia (1,000 tonnes) adding
up to 87% of Ukraine’s total ferroalloy imports. Ferrochromium and ferrosilicon were the
primary imported commodities accounting for 53.3% and 28.3% of the total imports. The
share of light ferroalloys (ferrosilicochromium, ferromolybdenum, ferrotungsten,
ferrotitanium, ferrovanadium, ferroniobium, ferrophosphorous, and others) in the
country’s total imports came to the substantial 17%.

RUSSIA

Ferroalloy production in Russia somewhat slowed down in the
first 5 months of 2001. According to data with Interfax (with reference to the State
Statistics Committee of the Russian Federation), ferroalloy output in January-May 2001
curtailed by 8.7% in comparison with the corresponding period of the previous year. This
downfall is becoming faster, since in the first 4 months of the current year, the
production curtailment was at only 7.4%. We suppose that the main reason for this tendency
is the dynamics of steel production in Russia. According to IISI data, steel output in
Russia in the five months of the present year added only 0.2% against the last year’s
corresponding period.

In the first 5 months of 2001, ferrochromium (60% Cr)
output in Russia curtailed by 21.5% to 87,900 tonnes (17,600 tonnes/month on average),
whereas that of ferrosilicon (recalculated for 45% silicon content) on the contrary
increased by 1.9% to reach 279,000 tonnes (55,800 tonnes/month on average). In May 2001,
Russian ferroalloy enterprises produced 58,300 tonnes of ferrosilicon (FS45) against
57,100 tonnes in April and 19,000 tonnes of ferrochromium (60%) against 17,400 tonnes in
April. Besides, output of ferrovanadium (38% V) over 5 months of 2001 came to 3,700 tonnes
(740 tonnes/month), out of which the May output reached 849 tonnes. Output of
ferromanganese (over 2% C) totaled 1,750 tonnes in the report period.

Interfax informed that JSC Kuznetskiye Ferrosplavy
(Kemerovo Ferroalloy Works, located in Kemerovo region), one of the largest Russian
ferroalloy producers, augmented its production of ferrosilicon (FS45) by 7% to reach
142,000 tonnes (recalculated for 45% silicon content) in January-May 2001. In May of the
current year, the plant made 31,000 tonnes of FS45 ferrosilicon, which was 10% more than
the figure reported in May of the previous year. It must be noted that in April 2001, the
enterprise produced 29,000 tonnes of this commodity.

GLOBAL MARKET

The situation on the global market for ferrosilicon was
rather ambiguous in May-June 2001. The European market indicated a growth of prices for
75% ferrosilicon in June to the level of DM/tonne 1,140-1,180 (Table 2). At the same time,
according to information with Metalbulletin.com, negotiations on the price policy for the
third quarter of the current year are only commencing at the moment. Wholesale prices are
noted to have been set at DM/tonne 1,200 and spot prices – at DM/tonne 1,100-1,150
(USD/tonne 495-520).

The North American market for ferrosilicon is influenced by
a substantial reduction of steel output (-13.6%), which has led to a price decline.
Throughout June, prices for imported 75% ferrosilicon kept at USD/lb 0.31-0.33 Pittsburgh
warehouses (USD/tonne 683-728) against the March level of USD/lb 0.32-0.34 Pittsburgh
warehouses (USD/tonne 705-750). A similar situation was observed on the American market
for 50% ferrosilicon of domestic origin. Prices in June reached USD/lb 0.36-0.38
(USD/tonne 794-838), which is the record low since 1997. The Asian market for 75%
ferrosilicon offered somewhat lower prices of USD/tonne 480-490 FOB Chinese ports than in
the previous months. MBR informed that the main reason for the price reduction was a
tender for supply of ferrosilicon at the price of USD/tonne 488 based on CIF Japan
announced by Tokyo Steel Manufacfurings.

With the exception of Europe, prices on ferromanganese
markets continued going down in May-June 2001. The European market for ferromanganese with
carbon content of up to 7.5% exhibited some stability with prices within DM/tonne
960-1,000. The American market for ferromanganese with the same properties kept the June
price at the level registered in May (USD/tonne 450-460), as compared with USD/tonne
460-475 at the year’s beginning. The American market for medium-carbon ferromanganese
exhibited the prices of USD/lb 0.38-0.40 (USD/tonne 838-882) against the end-of-March
level of USD/lb 0.40-0.43 (USD/tonne 882-948). Just as it was expected, quotations for
high-carbon ferromanganese on the Asian market began to go down after the first four
months of the current year, when prices for this commodity hit USD/tonne 396-400 FOB
Chinese ports. The prices of USD/tonne 380-390 FOB Chinese ports for high-carbon
ferromanganese, which were registered in May, kept throughout June.

The main regional markets for ferrosilicomanganese
exhibited an uncertain situation. The European market indicated an upward price tendency
in June to the level of DM/tonne 990-1,020 in comparison with the five-month stability at
DM/tonne 980-1,000. MBR experts think that Europe may experience a short-term deficit of
ferrosilicomanganese in the near future, although no significant price changes can be
expected in the second half-year. The American market indicated a gradual growth of prices
for ferrosilicomanganese, which reached USD/lb 0.24-0.25 (USD/tonne 529-551) in June, as
compared with USD/lb 0.22-0.23 (USD/tonne 485-507) in March. The Asian market topped out
in March (USD/tonne 415-425), after which the prices began to go down, when they finally
reached the level of USD/tonne 390-400 in June. Japan and South Korean markets are
sluggish at the moment, and Japanese steel-smelting companies are attempting to drive the
prices offered by their suppliers down. MBR experts say that prices for Chinese
ferrosilicomanganese are now approaching USD/tonne 400-405 FOB. In Japan, Chinese
ferrosilicomanganese is offered at USD/tonne 410-415 CIF Japan. In South Korea, prices for
this commodity of Chinese origin have settled at USD/tonne 449 CIF.

The situation on the global ferrochromium market did not
alter considerably towards the end of June 2001. According to MBR information,
negotiations between South African ferrochromium sellers and European steel manufacturers
resulted in a reduction of prices for ferrochromium to the level of USD/lb Cr 0.28-0.31 in
the middle of June, in comparison with the March rise to USD/lb Cr 0.32-0.38. In
January-May 2001, prices for high-carbon ferrochromium on the American market dropped from
USD/lb Cr 0.35-0.37 at the beginning of the report period to USD/lb Cr 0.31-0.33 at the
beginning and throughout June. In Asia, from January till May, prices for this commodity
reduced from USD/lb Cr 0.31-0.32 to USD/lb Cr 0.27-0.29, although June brought some signs
of recovery, when prices somewhat increased to the level of USD/lb Cr 0.28-0.29.

Thus, in general, the global market for ferroalloys
indicated some sluggishness in the report period caused by a slowdown of steel production
worldwide.

Vitaliy GNATUSH, expert with Derzhzovnishinform

Table1. Regional structure of the global steel
production in 2001

Table 2. Price situation on the global market for
basic ferroalloys

Sources: MBR “Ferro-alloys Monthly”,
Metalbulletin.com

Diagram 1. Ukrainian ferroalloy export dynamics in
2000-2001