Today, ferrous metallurgy features the highest manufacturing output among all industries of Ukrainian economy (27.5%) and enjoys the highest rates of production growth compared to the 1999’s figures (20.2%).

METALLURGISTS TO AUGMENT MANUFACTURING OUTPUT

METALLURGISTS TO AUGMENT MANUFACTURING OUTPUT

Ivan ZAITSEV, Ukrainian Association of Metal Scrap

Today, ferrous metallurgy features the highest
manufacturing output among all industries of Ukrainian economy (27.5%) and enjoys the
highest rates of production growth compared to the 1999’s figures (20.2%).

In 2000, despite the enterprises operating within mining
and metallurgical complex encountered numerous obstacles related to limited supplies of
power (especially in January, February, and the 4th quarter of 2000), coke (4th quarter),
and iron-ore raw materials (the latter caused by the lack of railway carriages conferred
to freight the manufactured products through most of the year), manufacturing output of
major industrial products hit the absolute record-high over the past seven years. Such
situation was mainly stipulated by favorable business conditions on foreign markets,
sufficient provision of steel-smelting enterprises with ferrous steel scrap, and working
conditions existing on metallurgic mills, the most part of which is embraced by the
economic experiment (see table 1).

The year 2000 saw the distinct augmentation of
manufacturing output. Extraction of commercial iron ore grew by 8.5 million tonnes
(+18.0%) against the figures reported in 1999 (including a 6.6 million tonnes recovery
(+18.3%) in extraction of iron-ore feedstock). Production of treated iron-ore feedstock
increased by 5.9 million tonnes (+13.2%) including a 3.3 million tonnes augmentation of
sinter output (+9.2%) and a 2.7 million tonnes growth of pellet production (+27.8%). Iron
casting went up by 3.9 million tonnes (17.7%), steel output – by 4.4 million tonnes
(+16.2%), production of bulk coke – by 2.1 million tonnes (+12.4%), output of commercial
rolled products – by 3.8 million tonnes (+16.5%) including a 3.3 million tonnes boost in
output of the finished rolled products (+17.0%).

Since Yuzhny Ore Mining and Concentrating Works boasts to
be the only sinter producer in Ukraine, local sintering workshops belonging to metallurgic
mills (safe for Dneprovsk Iron and Steel Works, which shrunk sinter production by 70
thousand tonnes) contributed the most to increased manufacturing output of sinter in 2000
(by 3.2 million tonnes, which is 10.1%).

The whole range of Ukrainian metallurgical mills is notable
for improved manufacturing performance embracing all stages of metallurgic production (see
table 2).

The only exception related to plunged production of iron
registered on Dneprovsk Iron and Steel Works (down by 32 thousand tonnes against the
1999’s figures), and plummeted output of the finished rolled products reported by
Donetsk Metallurgic Works (down by 171 thousand tonnes). However, the latter was
stipulated by increased production of billets, which amounted to 321 thousand tonnes in
2000 against 32 thousand tonnes in 1999.

Such months as June-August and November-December appeared
to be the most productive periods for Ukrainian metallurgic works.

Unsatisfied quality of railway transportation warped the
scheduled supplies of iron-ore feedstock by metallurgic enterprises and led to situation
when only 80% of pellets, and 10% of sinter and concentrate was supplied in time. On the
total, enterprises lacked some 32.500 railway carriages needed to freight manufactured
products.

In 2000, Ukrainian imports of iron-ore raw materials
witnessed a twofold augmentation against the 1999’s figures and amounted to 7.6 million
tonnes.

Table 1 indicates increased manufacturing output of steel
and commercial rolled products, compared to the figures reported in 1993. Augmentation of
steel output was encouraged by boosted supplies of steel scrap for metallurgic enterprises
and more timely payments for supplied scrap by metallurgic mills. Monthly supplies went up
significantly against the respective period of 1999 (table 3).

In 2000, overall supplies of steel and ferrous scrap bound
for Ukrainian metallurgic mills amounted to 5,834 thousand tonnes, which added 48.6% to
the 1999’s level. Share of purchased scrap totaled 186.1 kg per tonne of steel, which
considerably exceeded the figures traced in recent years (130.8 kg/tonne in 1995, 121.6
kg/tonne in 1996, 124.8 kg/tonne in 1997, 141.8 kg/tonne in 1998, and 143.9 kg/tonne in
1999). In 2000, total specific consumption of scrap for steel output amounted to 357.1
kg/tonne, which is higher than in 1999 (340.7 kg/tonne) but is not optimal for saving
performance of steel-smelting conversion.

Makeyevka Iron and Steel Works, AzovStal, Ilyich Iron and
Steel Works of Mariupol, Krivorozhstal, ZaporozhStal, and Nizhnedneprovsk Tube Rolling
Works appeared to be over-supplied with metal scrap needed for steel making (see table 4).

In 2000, Ukrainian exporters boosted their activity on
foreign markets for metal scrap. Owing to the Agreement between European Community on Coal
and Steel and the Government of Ukraine on Trade in Certain Steel Products being in force,
scrap exports from Ukraine witnessed almost no restrictions and reached its record-high of
4.92 million tonnes, which is 4.8% more than in 1999.

In 1999, export supplies of scrap exceeded domestic
consumption by 19.3% while in 2000, Ukrainian producers of steel purchased more scrap (by
18.6%) than it was supplied abroad.

In 2000, total procurement of ferrous scrap amounted to
10.75 million tonnes, which added 24.8% (2.1 million tonnes) to the figures reported in
1999.

Being the major item of Ukrainian exports, metal
contributes the most to its export revenues as well. However, Ukrainian economy suffers
from severe antidumping sanctions set by a number of Western countries, European Union,
and CIS.

With every coming year, increasing demand for conversion
billets on foreign market stipulates the augmentation of their share in production of
commercial rolled products.

Today, foreign partners encourage Ukrainian imports of raw
materials and semis (iron ore concentrate, metal scrap, iron, ferroalloys, slabs, billets)
but try to restrict Ukrainian imports of finished metal products.

Such approach put distinct obstacles for metallurgic
enterprises willing to enter foreign markets. Besides, limited raw materials (coking coal
especially) are able to hamper further augmentation of manufacturing output by metallurgic
mills in 2001. Thus, presiding at a meeting devoted to Ukraine’s mining and metallurgic
complex and held on January 10, 2001 at Krivorozhstal State-Owned Iron and Steel Works of
Krivoy Rog, the President of Ukraine Leonid Kuchma obliged the Cabinet of Ministers of
Ukraine to elaborate and introduce special measures aimed at increasing domestic
consumption of metal products and improved structure of their exports. To accomplish the
latter task, share of raw materials and semis in Ukrainian exports should be abridged
while share of the finished metal products should be boosted to the maximum.

Economic experiment launched in Ukrainian mining and
metallurgical complex brought in slight positive trends in financial situation and
manufacturing performance of metallurgic enterprises, augmented net profit (revenues) and
pushed up deductions to budget and Pension Fund. This was greatly stipulated by the
granted privileges, which replenished floating assets of the enterprises. Along with this,
funds allotted for technical restructuring of production remain insignificant.

According to the Law of Ukraine, economic experiment will
be terminated on January 1, 2002. Thus, Ukrainian metallurgy will need further investments
to introduce new resource-saving technologies, boost the quality of the finished products,
and augment efficiency of metallurgic output.

Table 1. Output of major metal products by Ukrainian
metallurgical mills (ths. tons)

Table 2. Manufacturing output of Ukrainian
metallurgical mills (‘000 tonnes)

Table 3. Accession (procurement) and utilization of
ferrous scrap (‘000 tonnes)

Table 4. Supplies of steel scrap on metallurgical
mills (‘000 tonnes)