According to the experts, the year 2000 was favorable for Ukrainian metallurgical industry. The below-presented production and export data proves this.
FERROUS METALS
FERROUS METALS
UKRAINE
According to the experts, the year 2000 was favorable
for Ukrainian metallurgical industry. The below-presented production and export data
proves this.
Production
According to Metallurgprom, in the 12 months of 2000,
Ukraine manufactured 25,697 ths. tons of pig iron, 31,373 ths. tons of steel, and 22,529
ths. tons of ready-made rolled metal. There was a 12% in production of pig iron, while
steel production expanded by 16% and production of rolled metal added 15% against the
respective period of 1999.
Ukraine’s production of pig iron, steel, and rolled metal
in the 12 months of 1999 and 2000 is presented in table 1.
Table 1. Ukraine’s production of pig iron, steel,
and rolled metal, ths. tons
| Commodity | 12 mo of 1999 | 12 mo of 2000 | 2000/1999 ratio, % |
| Pig iron | 23,010 | 25,697 | +12 |
| Steel | 27,080 | 31,373 | +16 |
| Finished rolled metal | 19,251 | 22,529 | +16 |
Export
In 2000, Ukrainian exporters saw increase in both physical
export and export currency earnings.
During this period, Ukraine exported some 28.6 mln. tons of
metal products worth USD 4,834.6 ln. While export supplies added 7.8% in terms of physical
volume, currency earnings advanced by 32%.
The main articles of Ukrainian export included semis,
including square billets and slabs (30% or 8,610 ths. tons), ferrous metal scrap and
wastes (17% or 4,960 ths. tons), HR flat metal (17.1% or 4,790 ths. tons), rebars (11% or
3,145 ths. tons), HR flat metal (4% or 1,240 ths. tons), and bars (3% or 730 ths. tons).
Data on Ukraine’s export of metal products in 1999 and
2000 is given in table 2.
Table 2. Export of metal products from Ukraine
| Metal products | 1999, ‘000 tons | Percentage | 2000, ‘000 tons | Percentage | 2000/1999 ratio, % |
| Long rolled metal | 4,151 | 16 | 4,868 | 17 | +17.3 |
| Flat metal | 5,698 | 22 | 6,030 | 21 | +5.5 |
| Bars | 520 | 2 | 730 | 3 | +40.4 |
| Other metal products | 950 | 4 | 1,038 | 4 | +9.3 |
| Semis | 7,981 | 30 | 8,610 | 30 | +7.9 |
| Raw materials | 7,222 | 27 | 7,324 | 26 | +1.4 |
| TOTAL | 26,522 | 100 | 28,600 | 100 | +7.8 |
Middle East and S.E.Asian countries traditionally were the
main markets for the Ukrainian-made metal products. These regions consumed some 7.8 mln.
tons and 7.6 mln. tons of metal products respectively. Nevertheless, while against 1999
supplies to Middle East countries increased by 12.3%, export to S.E.Asia lowered by 18.5%.
After the crisis events in the economy of numerous CIS
countries in 1999 and 2000, Ukrainian exporters were able to renew previously lost
positions on this market – export of metal products to this region added 8.4%, thus
reaching 2,400 ths. tons. The main export articles were: HR flat metal, rebars, as well as
bars and ferroalloys.
Ukrainian steel rolled metal was in hot demand on the
market of Eastern European countries. This explains growth of export supplies, 2000’
supplies of metal products to this market accounted for some 2.66 mln. tons (+ 7%) of
metal products worth some USD 475 mln. (+22%). Composition of physical export to this
region was as follows: semis (26%), HR flat metal (19%), wire rod (16%), rebars (17%), and
pig iron (2%).
By-region distribution of Ukrainian export of metal
products is shown in table 3.
Table 3. By-region distribution of Ukrainian export
of metal products
| Region | 1999, ‘000 tons | Percentage | 2000, ‘000 tons | Percentage | 2000/1999 ratio, % |
| Middle East | 6,927 | 26.1 | 7,896 | 27.6 | +12.3 |
| S.E.Asia | 9,070 | 34.2 | 7,655 | 26.8 | -18.5 |
| North America | 1,790 | 6.7 | 2,520 | 8.8 | +29.0 |
| CIS | 1,730 | 6.5 | 2,400 | 8.4 | +27.9 |
| EU | 2,040 | 7.7 | 2,125 | 7.4 | +4.0 |
| Africa | 1,355 | 5.1 | 1,633 | 5.7 | +17.0 |
| Other | 3,610 | 13.6 | 4,371 | 15.3 | +17.4 |
| TOTAL | 26,522 | 100.0 | 28,600 | 100.0 | +7.8 |
Prices
In 2000, favorable conjuncture on foreign markets
facilitated increase and stabilization of Ukrainian export prices. These reached the high
in the middle of the year, when demand on the world market was the strongest.
In the end of the year, the prices got lower than it was
supposed at the beginning of the year. Moreover, the prices for wire rod and galvanized
plates being among the most liquid Ukrainian commodities virtually did not change and kept
at the level of the 1st-3rd quarters of 2000.
Dynamics of Ukrainian export prices is presented in table
4.
Table 4. Dynamics of Ukrainian export prices, USD/MT
FOB Ukrainian ports
| Commodities | 1st quarter of 2000 | 2nd quarter of 2000 | 3rd quarter of 2000 | 4th quarter of 2000 |
| Slabs | 150-160 | 175-185 | 160-180 | 140-180 |
| Wire rod | 160-170 | 165-175 | 165-175 | 165-175 |
| Rebars | 165-175 | 165-180 | 165-180 | 165-180 |
| CR plates | 240-245 | 260-280 | 245-275 | 240-270 |
| Galvanized plates | 450-480 | 410-440 | 410-430 | 430-450 |
| Уголок, швеллер | 160-190 | 160-190 | 160-190 | 160-190 |
| Чугун передельный | 110-120 | 115-125 | 105-115 | 103-108 |
Statistics proves that Ukrainian metallurgy, for its export
orientation, does depend on the global conjuncture. Just the positive global trends can
explain expansion of Ukrainian export in 2000.
However, according to the forecasts of the world consulting
companies, in the present year, the situation on the world market will be unfavorable:
crisis events in the US economy, along with chaos on the markets of S.E.Asia, will drive
prices down. This will certainly concern Ukrainian exporters.
One can suppose that Ukraine will remain the biggest world
supplier of raw materials to the “expensive” markets (EU and USA) – quotas and
antidumping duties introduced well before will not allow shipping rolled metal with high
rate of processing. Besides, in the nearest time, new antidumping quotes may be added,
which will additionally narrow these markets.
Along with this, the markets of Turkey, Eastern Europe and
Middle East, as well as of CIS countries and Africa will be promising in 2001. In the
present year, export to these countries will move up by some 5-12%.
One should not expect any positive price changes. Ukrainian
and world experts give the following arguments against increase in Ukrainian export
prices:
- Low quality of Ukrainian-made rolled metal manufactured
with equipment, which is completely out-of-date;
- Кextremely unstable supply terms (deficiency with supply
of energy and provision with raw materials break supply terms foreseen by the contracts);
- Continual increase in prices for raw materials and
partial dependence on import make cost of commodities high and export – unprofitable;
- Weak interior market for metal products (interior
consumption will make some 4.2-4.5 mln. tons);
- Dependence on export markets.
REGIONAL STRUCTURE
EU
In 2000, the market for EU countries was the only
relatively “smooth” market for metal products from the price and conjuncture
viewpoint.
Last year was favorable for the economy of EU countries, as
GDP growth, according to Eurofer, indicated some 3.5%. There was increase in production of
machine building, construction, and metalworking industries, which arose from recovery of
investment activity in the region. This, in its turn, caused strengthening of demand for
rolled metal and raw materials necessary for steel production.
Besides, strict measures aimed at restriction of import
supplies, lowered competition in the market and facilitated demand-supply balance.
Therefore, from the price viewpoint, this market was the most stable among all the other
world markets – fluctuation of prices did not exceed 7-12%.
Besides, the main Western European industries are at the
upsurge stage. These are as follows:
Construction
For a few years, production by this sector of Western
European industry, which consumes the largest volume of rolled metals, steady expands.
High investment in this industry initiated recovery of business activity both in communal
and industrial production. According to the experts, these trends will proceed in 2001.
Automotive industry
In 2000, both export and foreign markets of EU
auto-manufacturers were rather active – production of automobiles, especially, of
industrial auto-enginery, was high. Respectively, demand for metal products by machine
building companies intensified. According to representatives of some automotive companies,
in 2001, production in this sector of EU industry will somewhat lower. Partially, this
origins from increased taxes in the EU and partially – from the unfavorable situation on
the energy market.
Heavy machine building
According to the experts with Eurofer, even with the latest
increase, present level of taxes will substantially effect scale of investment into this
industry both in the present and next year. However, it is supposed that export markets
will be traditionally strong, even if the US market experiences some weakening of market
indicators’ growth. Still, the volume of orders both on the interior and exterior
markets remains big. According to the estimates, machines and equipment for oil-and-gas
industry will enjoy the strongest demand – increase in prices for oil stimulates demand
for enginery used in this industry.
Metalworking
The level of business activity in this industry is
extremely high and will keep the next year. This sector of the industry depends on the
automobile construction and construction sectors and has good prospects. The market for
welded tubes will remain stable in the light of recovery in the power industry. On the
contrary, production of large-diameter tubes narrowed, starting from the second quarter of
2000, due to worsened conjuncture of export markets.
Instrument engineering
According to Eurofer, production of durables justified
forecasts for the year 2000 and has to keep high in the first half of 2001, since economic
indicators facilitate this: numerous EU countries lowered taxes related to production of
household appliances against the background of increasing real incomes of the population.
These, as well as other factors, explain production growth
in the countries of Western Europe. In 2000, steel production in the region reached
163.096 mln. tons, which is 4.9% up from 1999’ figures (155.47 mln. tons). Production
growth was reported by Germany (+10.2% to 46.372 mln. tons), Italy – (+6.7% to 26.544
mln. tons), France – (+3.8% to 20.967 mln. tons) and other countries.
As was noted above, price terms on the EU market were
favorable. In the first half of 2000, there was an increase in prices for metal products,
specifically, foe flat metal. However, in the second quarter of 2000, influence of global
trends on the decrease in prices touch this market as well. While decline in prices for
long rolled metals in the 3rd-4th quarters of was mostly seasonal (period of winter
holidays and seasonal decrease of construction works), the situation with flat metals was
initiated by the following factors:
- Import supplies, despite the restrictions, kept at the
level registered in the record year 1998 and created dis-balance on the market;
- Export, due to worsened conjuncture on the exterior
markets, lowered, and exporters reoriented on the interior market, having created
additional competition.
Ukrainian export to the EU countries was mainly represented
by raw materials (semis, steel scrap, pig iron, and ferroalloys). Percentage of these
metal products in the Ukrainian export to EU indicated some 81%. Export of semis accounted
for some 860 ths. tons, export of ferrous metal scrap and wastes totaled some 720 ths.
tons.
Export of ready steel rolled metal was low: 115 ths. tons
of HR flat metal, 36 ths. tons of rebars, 24 ths. tons of wire rod, and 16 ths. tons of CR
flat metal.
Dynamics of prices for the European prices id given in
table 5.
Table 5. Dynamics of prices for export from the EU to
the third countries, FOB, USD/MT
| Commodity | 1st quarter of 2000 | 2nd quarter of 2000 | 3rd quarter of 2000 | 4th quarter of 2000 | 01.02.2001 |
| Billets | 170-200 | 170-195 | 175-180 | 170-180 | 170-180 |
| Rebars | 210-240 | 220-240 | 220-265 | 220-240 | 220-240 |
| Wirerod | 220-230 | 220-230 | 210-220 | 190-200 | 190-200 |
| HR coil | 300-320 | 320-330 | 285-310 | 190-220 | 190-220 |
| CR coil | 350-390 | 420-440 | 410-420 | 300-320 | 300-320 |
| Thick plate | 300-320 | 350-370 | 320-350 | 290-310 | 290-310 |
According to Eurofer, the prospects for interior Western
European market can be assessed as favorable – increase in domestic consumption caused
by production growth in related industries will proceed in the present year. Respectively,
demand on the market will be rather stable. Besides, effective protective measures will
further save the market from blows. Supposedly, the prices will not alter weighty.
Along with this, European producers will see unfavorable
prospects on the external markets. The situation with flat metal will be particularly
uncertain: potential antidumping sanctions by the USA, difficulties with supplies to the
S.E.Asia, as well as over-production and strong competition on ths world market for flat
metal will not facilitate price growth in the nearest time. According to the estimates, in
the 1st-2nd quarters of 2001, the prices for this steel rolled metal will drop by USD/MT
10-20.
TURKEY
Turkey, for peculiarities of infrastructure on the metals
market, is one of the biggest world importers of flat metal and largest world exporter of
long rolled metal (rebars and wire rod). Last year was not the exception.
In the year 2000, Turkish market for steel rolled metal was
on the upsurge – construction and repair works to liquidate after-effects of recent
earthquake took place in the country. Demand for steel rolled metal was extremely high.
Respectively, the prices were record high. Favorable global conjuncture in the 2nd-3rd
quarters facilitated growth of export prices.
In the 4th quarter of 2000 the prices were decreasing. A
lot of Turkish traders explained this with the decrease in EURO exchange rate against USD
(weighty volumes of Turkish rolled metal were shipped to the EU), as well as with the
intensified competition on the exterior markets.
Dynamics of export prices on the Turkish market is shown in
table 6.
Table 6. Dynamics of export prices on the market of
Turkey, FOB, USD/MT
| Commodity | 1st quarter of 2000 | 2nd of 2000 | 3rd quarter of 2000 | 4th quarter of 2000 | 01.02.2001 |
| Billets | 160-170 | 180-185 | 170-175 | 170-200 | 150-170 |
| Rebars | 220-245 | 220-245 | 220-245 | 190-200 | 190-200 |
| Wire rod | 215-225 | 225-230 | 225-230 | 190-210 | 190-200 |
| HR coil | 240-250 | 270-290 | 270-290 | 205-215 | 200-210 |
| CR coil | 310-330 | 360-380 | 360-380 | 310-330 | 290-300 |
Worsening of market conjuncture in the end of the year
caused lowering of production growth in Turkey. In 2000, Turkish metallurgical enterprises
manufactured some 14.325 mln. tons of steel. This is only 0.1% up from the last year.
Due to favorable trends on this market, Ukrainian exporters
could expand export to Turkey. In 2000, Ukrainian supplies made some 4,265 ths. tons of
metal products, which exceeds last year’s indicators by 3%.
Supplies expanded at the expense of export of semis (+22%
to 460 ths. tons), HR flat metal (+78% to 815 ths. tons), CR flat metal (+57% to 210 ths.
tons), and pig iron (+15% to 220 ths. tons).
According to Turkish trade companies, starting the second
quarter of 2001, one should expect increase in prices both on the export and domestic
market for Turkish metal products.
Turkey is a pure net importer of thick rolled metal.
Consumption of plate metal increases and will reach 10 mln. tons till 2010, according to
preliminary estimates. Therefore, an upward price trend for this type of rolled metal will
keep in the nearest future – starting from the beginning of the 2nd quarter, an increase
in prices is expected.
According to the experts with Metal Bulletin, in 2001
Turkish export prices will feature stability, though slight changes are possible. These
can be caused by seasonal factor, on the one hand, and by fluctuation of USD exchange
rate, on the other hand.
USA
As American Steel Institute (AIIS) stated in its annual
report, during the whole year 2000, steel market was rather strong. However, aggressive
measures in regard to price levels initiated by American manufacturers, worsened the
situation with over-supply of the commodity to the market, which relevantly lowered
prices.
Scenario on the American market developed as follows.
End of 1999 – beginning of 2000. During this period,
demand for steel rolled metal started intensifying. Thus, the producers, using favorable
moment, announce on the next increase in sale prices for virtually all types of steel
rolled metal. Buyers’ activity is high – they purchase off rolled metal looking
forward to further increase in prices. Warehouse stock successively increases.
January-July 2000. During this period, demand for rolled
metal keeps on increasing. However, warehouse holders started paying attention to import,
since prices for imported products, despite longer supply terms, appeared to be more
advantageous. Along with this, manufacturers increase import of semis, thus expanding
production.
July – September 2000. There started period, when supply
exceeded demand, though the latter was low nevertheless. The buyers became more careful on
the over-saturated market. The volume of orders respectively started lowering. The prices
fixed in previous markets were reducing.
Metallurgical companies, anticipating problems with sales
of manufactured products and lowering of orders’ volume sold products in panic and
decreased prices. Even previously imported semis were offered on the market. Import under
previously concluded contracts aggravated the situation.
October-December 2000. Having fears in regard to
introduction of antidumping sanctions, importers abruptly narrowed supplies to this
market. Sales, especially, of flat metal, plunged. The prices started plunging with the
same rates as they soared. The market for long rolled metal was the only exception – the
prices for rebars and wire rod yet keep the same, thanks to construction industry.
Dynamics of import prices on the US market is given in
table 7.
Table 7. Dynamics of import prices on the US market,
CIF, USD/MT
| Commodity | 1st quarter of 2000 | 2nd quarter of 2000 | 3rd quarter of 2000 | 4th quarter of 2000 | 01.02.2001 |
| Rebars | 190-200 | 240-250 | 210-220 | 210-220 | 210-220 |
| Wire rod | 215-220 | 230-250 | 220-240 | 220-230 | 210-230 |
| HR coil | 315-330 | 320-330 | 265-270 | 240-260 | 240-260 |
| CR coil | 420-440 | 430-450 | 430-450 | 365-385 | 340-360 |
| Thick plate | 350-370 | 350-370 | 350-370 | 350-370 | 320-350 |
According to the experts with AIIS, import was not the
reason for price decline. On the contrary, decrease in prices was initiated by big
purchases of rolled metal, which started after numerous metallurgical works announced of
their intention to increase prices.
At the same time, AISI expresses the other viewpoint.
According to its experts, such a situation arose solely due to low import. According to
AISI data, in 2000 USA imported some 37.828 mln. tons of steel rolled metal, which exceeds
respective 1999’ figure by 6% and 1998’ figure by 9%. Domestic consumption was at some
134 mln. tons.
Import growth occurred due to expanded supplies from China
(+89% to 1,455 ths. tons), Ukraine (+96% to 1,547 ths. tons), Taiwan (+30% to 1,262 ths.
tons), Russia – (+20.5% to 1,511 ths. tons), India – by 70.6% to 1,000 ths. tons), as
well as Turkey (+by 66.1% to 666 ths. tons).
According to the data with the State Customs Service of
Ukraine, the main articles of Ukrainian export to the USA were semis, incl. slabs (24% or
566 ths. tons), pig iron (45% or 1,056 ths. tons), wire rod (12% or 273 ths. tons), rebars
(7% or 161 ths. tons), as well as HR flat metal (9% or 219 ths. tons).
As AISI experts report, in 2001, import of steel rolled
metal to the US market will decrease. Supplies of HR flat metal will plunge.
This will somewhat balance the market. However, one should
not wait increase in prices before spring. Starting March-April 2001, American market will
probably activate and prices add USD/MT 10-30 on average. This guess can be explained with
possible introduction of next anti-dumping sanctions and decrease in USD exchange rate
There is also an opinion that the situation will further
worsen. This will take place in case if American steel companies will expand production
against the background of lowered demand among the industrial consumers, namely,
automobile and shipbuilding industry.
CHINA
According to the data with the International Iron and Steel
Institute (ISII), China is the biggest world steel producer – in 2000, China
manufactured some 125.8 mln. tons of steel. This is 1.7% from last year’s figure (123.64
mln. tons). Steel consumption in 2000 was at some 138 mln. tons.
During the whole year 2000, conjuncture of Chinese market
altered. In the 1st-3rd quarters, the market saw strong though chaotic demand for flat
metals and bars. Flat metal was in special demand, since in the 2nd quarter of 2000, it
was in shortage – world exporters, willing to sell this type of rolled metal at better
prices, forwarded export supplies to the European and American markets.
Besides, Chinese import licensing partially facilitated
this – complicated procedure to get the license for export, as well as difficulties with
opening of L/C in Chinese banks made a lot of traders refusing from supplies to this
country.
In the 4th quarter of 2000, the situation on the market was
critical. According to Chinese reviewers, in this period, competition among suppliers on
the market was extremely tough. On the other hand, CIS exporters tried to retain their
positions at any price, lowering the prices, on the other hand, suppliers from Japan and
South Korea, having cut export to the EU and USA started mastering new markets.
Ukrainian exporters also faced these problems. According to
statistical data, in 2000, Chinese market consumed some 2,990 ths. tons of Ukrainian metal
worth USD 506,850 ths. This is 56% down from the last year’s physical export, while
currency earnings lost 27.5%.
The main articles of Ukrainian export were: semis, mainly
square billets (60% or 1,800 ths. tons), HR flat metal (19% or 578 ths. tons), and CR flat
metal (16% or 475 ths. tons).
Dynamics of import prices on the Chinese market is
presented in table 8.
Table 8. Dynamics of import prices on the Chinese
market, CIF, USD/MT
| Commodity | 1st quarter of 2000 | 2nd quarter of 2000 | 3rd quarter of 2000 | 4th quarter of 2000 | 01.02.2001 |
| Billets | 165-170 | 170-190 | 185-190 | 170-180 | 175-180 |
| Rebars | 150-155nom | 150-155nom | 150-155nom | 150-155nom | 150-155nom |
| Wire rod | 150-155nom | 150-155nom | 150-155nom | 150-155nom | 150-155nom |
| HR coil | 240-270 | 235-240 | 230-250 | 170-200 | 160-175 |
| CR coil | 300-320 | 340-360 | 340-350 | 260-290 | 255-270 |
As experts with World Metals report, it is not worth
pinning hopes on weighty recovery of Chinese economy. It is forecast that export from
China will not exceed 7 mln. tons, while steel production will not exceed 130 mln. tons.
Integration of China to the WTO will not allow the
Government to restrict steel import. Thus, according to experts, it will reach 16-16.5
mln. tons (including flat metals and tubes).
According to the data with World Metals, in 2001 prices for
steel rolled metals feature a tendency for decrease. However, in the end of the 2nd
quarter some increase is possible. At the beginning of the 4th quarter, the market will
again see the crisis situation. Nevertheless, this does not concern rolled metal, which is
not manufactured in China or manufactured in low volumes (rolled metals from alloyed
steel, flat metal with coating).
Besides, the following factors can be of decreasing impact
for the market:
- Increase in prices for oil, coal, electric power, and
transport will facilitate stabilization in the steel segment of Chinese market;
- Due to forecast decline in the US GDP, anti-dumping
measures will be introduced against Chinese exporters. This will lower Chinese export and
create extra destabilization on the world market.
State Commission on Economy and Trade of China developed
the program aimed at “well-arranged” operation of Chinese metallurgical works.
According to provisions of this program, in 2001 one should expect:
- Strengthening of measures aimed at control of production
volumes (encouraging of metal production for short-term supply and restriction of metal
production for long-term supply);
- Shutting of small metallurgical works;
- Arranging strict control over import and expansion of
export supplies.
Aforementioned supplies should drive Chinese market out of
the crisis, having created favorable environment both for local producers and importers.
Increase in prices id forecast.
According to the experts with DZI, in the near future, the
first two conditions will not be implemented. Chinese Government would hardly agree with
stricter measures against importers (last year China became the member of WTO), and global
conjuncture for metal products will facilitate increase in export from China.
Respectively, recovery of prices in the 1st-2nd quarters of 2001 is impossible.