FERROALLOYS

FERROALLOYS

UKRAINE

The second millennium is over. Absence of the generally
acknowledged concept for development of the world economy in the planetary scale results
in local trade conflicts and uneven development of the countries. As a result, the number
of unemployed at our planet is estimated at 1 bln. people. However, general statement of
the world economy depends on development of separate countries. Unfortunately, Ukraine
presently cannot serve as a good example. Despite Ukraine has original powerful industrial
and intellectual potential, only the ninth year of independence demonstrated the first
signs of recovery after the violent decline. Ferroalloy producing enterprises are the
dramatic example of it.

Results of operating activities in 2000 witness that
Ukrainian ferroalloy products not only maintained their positions in the world market, but
also strengthened these. That is why, performance of Ukrainian ferroalloy producers and
traders can be evaluated as quite successful one. Production, export, and interior
consumption of ferroalloys added some 40% as against 1999. At the same time, import
turnover soared 2.5 times.

Positive tendency in the world economy, especially in steel
industry, contributed to successful ferroalloy trade in Ukraine. In accordance with IISI
data, last year, 63 countries making about a 98% of the world production, manufactured
828.5 mln. tons of steel. The growth rate indicated 7.4% in comparison with the same
period of the previous year. World regional reported production growth fluctuating from
3.7% (Oceania) to 16.0% (SIC).

In accordance with UkrFA data, in 2000, Ukrainian
ferroalloy plants (Nikopol, Zaporozhye, and Stakhanov), as well as Kramotorsk
Metallurgical Works manufactured 1,457.6 ths. tons of output (see table 1), which is equal
to 138% against the previous year.

Table 1. Ferroalloy production in Ukraine, ths. tons

* Source: UkrFA

If compared to the previous year, the portion of
enterprises in total ferroalloy production altered somewhat. Nikopol Ferroalloy Plant
increased its portion by some 6.6%, while Zaporozhye Ferroalloy Plant lost a 7.3%.

Positive operation of Ukrainian ferroalloy plants in 2000
was supported not only by the external factors, but also by mature approach to settlement
of internal problems. Especially this concerns uninterrupted electricity supply
irrespective of seasons. At the same time, it should be noted that electric power in
Ukraine is one of the most expensive in the world. Amalgamation of ferroalloy and
electricity producers is one of the approaches aimed at reduction of prices for
electricity. Creation of vertically integrated holdings promotes reduction of inside
expenditures for electricity and raw materials. This approach was also chosen by Russia.
Probably, the Cabinet of Ministers of Ukraine and the Parliament of Ukraine should respond
to changes in the domestic and global market more operatively and make respective
decisions to enhance competitive abilities of Ukrainian output. Especially this concerns
ferroalloy production being popular on the world market.

Favorable conjuncture on the ferroalloy market in 2000 gave
an opportunity to increase physical export of ferroalloys from Ukraine by 40%, in
comparison with 1999 (see figure 1).

Figure 1. Export dynamics of Ukrainian ferroalloys in
1999-2000

In 2000, total Ukrainian ferroalloy exports, in accordance
with the data of Ukrainian Customs Service, amounted to some 823.7 ths. tones worth USD
345.2 mln.

Composition of Ukrainian ferroalloy export did not undergo
substantial changes in 2000, in comparison with 1999 (see figure 2).

Figure 2. Composition of Ukrainian ferroalloy export
in 1999-2000

While percentage manganese ferroalloys practically remained
the same (78.5-78.6%), the portion of ferromanganese increased by and the portion of
silicomanganese lowered by 2.9%. The fact, that the portion of low-tonnage ferroalloys in
total exports has increased from 1.3% to 1.7% should be noted as a positive sign, which
evidences recovery of the Ukrainian producer of this commodity.

By-region distribution of Ukrainian ferroalloy supplies
last year was rather extensive: 34 countries on the four continents, excluding South
America and Australia with Oceania. However, the year 1999 was more successful from the
viewpoint of countries’ quantity, with 42 countries consuming Ukrainian ferroalloys. At
the same time, it is worth mentioning that in 2000 average supply, directed to one
country, 1.7 times exceeded that in 1999. This evidence concentration of supplies and
strengthening of Ukraine’s position on the world market.

By-region export distribution of Ukrainian ferroalloys
displays CIS-countries among the main consumers, keeping a 47.4% portion in total export
(see figure 3).

Figure 3. Export of ferroalloys in 1999-2000 by
regions

Russian Federation holds the leadership among the
CIS-countries. RF imported from Ukraine about 331.9 ths. tones of ferroalloys (54.5%,
40.0% and 5.2% indicating portions of ferrosilicomanganese, ferromanganese and
ferrosilicon correspondingly).

Asian countries rank the second in consumption of Ukrainian
ferroalloys. These consume 26.9% of the total export. The portion of silicomanganese
amounts to 72.9%; ferrosilicon – 26.5%; ferromanganese – 0.6%. South Korea and Turkey are
traditional markets for Ukrainian output in this region (54.9 ths. tons and 129.0 ths.
tons correspondingly).

A 12.8% of total ferroalloy export is shipped to Eastern
Europe. Ferrosilicon amounts to 45.0%; ferrosilicomanganese – to 25.6%; and ferromanganese
– 29.3% of the total export to this direction. Romania (44.5 ths. tons) and Poland (23.5
ths. tons) are the largest purchasers of Ukrainian ferroalloys in this region.

The situation in export of basic ferroalloys in 2000
developed in the following way.

Ferrosilicomanganese in 2000 was exported to 21 country of
the world in comparison to 22 countries in 1999. The largest portion of export supplies
was forwarded to CIS-countries (44.4% of the total volume) and to Asia (35.4%). The
largest consumers of the product included: Russia (180.8 ths. tons), Turkey (95.7 ths.
tons), South Korea (54.9 ths. tons), Canada (17.6 ths. tons), and Egypt (17.9 ths. tons).
These consume about a 80% of the commodity. It should be mentioned that average monthly
export of ferrosilicomanganese exceeds last year’s level approximately by 33%.

Ferromanganese was exported to 15 countries of the world in
comparison with 22 countries in 1999. The largest export supplies were made to
CIS-countries (80.9% of the total volume) and to Eastern Europe (16.1%). It is reasonable
that Russia is the absolute leader in consumption: 132.8 ths. tons or 69.6% of the total
export. Romania and Kazakhstan are the next largest consumers: 26.6 and 13.4 ths. tons
correspondingly. Average monthly export increased approximately by 57% in comparison with
1999.

Ferrosilicon was shipped to Asian countries (a 41.8% of the
total volume), Eastern European countries (34.9%), and CIS-countries (14.8%). Turkey (32.1
ths. tons), Russia (17.4 ths. tons), USA (13.6 ths. tons), and Romania (15.8 ths. tons)
stand out against the background of other 26 countries, consuming this product. On the
whole, average monthly export of ferrosilicon exceeds last year’s level approximately by
32%.

Insignificant volume (35 tons) of ferrochrome was exported
to Russia and Romania.

The range of low-tonnage ferroalloys exported from Ukraine
to 13 countries was quite traditional: ferronickel, ferromolybdenum, ferrotungsten,
ferrotitanium, ferrovanadium, and ferroniobium.

Out of all low-tonnage ferroalloys, export supplies of
ferronickel (59.8%) and ferrotitanium (13.9%) were the biggest, totally amounting to 14.4
ths. tons. Most ferronickel supplies were forwarded to EU member-states (44.3%) and Baltic
states (55.5%). Germany and Estonia are the main consumers of ferronickel. Ferrotitanium
was predominantly exported to Russia, Netherlands, and USA. These destinations contributed
75.1% to the total ferroalloy export.

Steel production in Ukraine expanded and, in its turn,
stimulated consumption of ferroalloys that are not manufactured in Ukraine. As a result,
in 2000, Ukrainian import of ferroalloys accounted for 38.2 ths. tons worth USD 39.3 mln.
During this period, 20 European and Asian countries supplied ferroalloys to Ukraine.

Main supplies were made from Latvia, Russia, Netherlands,
Georgia, and Germany (91.9% of the total volume). The key ferroallys supplied to Ukraine
included ferrochromium (60.8%), ferrosilicon (17.9%), and ferromanganese (7.6%).
Low-tonnage ferroalloys, specifically, ferromolybdenum, ferrotungsten, ferrotitanium,
ferrovanadium, ferroniobium, ferrophosphorus etc. contributed 13% to the total import.

GLOBAL MARKET

Rather unambiguous pricing situation was registered on the
world market for basic ferroalloys (see table 2).

During the last three years, the world market for
ferrosilicon was generally characterized by the downward price tendency, although local
upturns and declines, as well as phases of relative stabilization also had a place. In
2000, the European market for 75%-ferrosilicon saw prices fluctuating within the range of
DEM/MT 900-1,250. 2000’ average annual price practically does not differ from 1999’
average. US market for 75%-silicon also was unstable: the prices fluctuated within USD/lb
0.340-0.380 (USD/MT 750-838). Average annual price lost almost 10% in comparison with
1999. Despite intensified demand in Japan, the situation on the Asian market for
75%-ferrosilicon featured price fluctuation within USD/MT 475-510 FOB Chinese ports. In
comparison with 1999, average annual price decreased approximately by 6%. On the whole,
the situation on the ferrosilicon market does not suppose powerful cataclysms. However,
antidumping investigations in the United States and Europe may be decisive.

As regards the European market for ferromanganese with
carbon content of 7.5%, after recession in September 1999 (DEM/MT 650-700), prices
gradually moved up and culminated in October and November 2000 (DEM/MT 980-1,050). As
result, 2000’ average price amounted to DEM/MT 896, exceeding 1999’ average
approximately by 25%. US prices for high-carbon ferromanganese usually follow European
prices with some correction. In the last two years, the low was registered in October 1999
(USD/lt 440-455) and the high was registered in September 2000 (USD/lt 490-520). At the
same time, average annual price in 2000 exceeded the same last year’s indicator only by
7%. Asian market for high-carbon ferromanganese, regardless to the fact that in 2000
prices fluctuated within USD/MT 375-400, reported average annual price exceeding 1999’
average less than by one per cent.

After the global decline in prices in May 1999 (DEM/MT
785-800), European market for ferrosilicomanganese saw a tendency to increase and came
into the phase of stabilization (DEM/MT 980-1,020), starting March 2000 At the same
moment, in 2000, average annual price (DEM/MT 994) was 23% up from 1999. US market
demonstrated higher average annual prices (USD/MT 530 against USD/MT 469 in Europe), which
exceeded 1999’ level by 11% approximately. In 2000, the fluctuation had the spread of
USD/MT 430-595, the warehouse of Pittsburgh.

At the Asian market of silicomanganese, average annual
price (FOB, Chinese ports) exceeded the indicator of 1999 approximately by 1%, regardless
to the fact that market was under effect of Chinese producers. Prices fluctuated within
USD/MT 385-425.

Table 2. Prices on the world market of basic
ferroalloys (average monthly levels)

Sources: MBR «Ferro-alloys Monthly»,
www.metalbulletin.com, www.coremarkets.com

The past year was the most quite for ferrochromium market
for the last three years. Traders even talked about extending of quotation period.
However, this suggestion remained on paper and electronic disks. Nevertheless, it should
noted that unlike other basic ferroalloys, average annual prices for high-carbon
ferrochromium oin the European and American markets were practically the same both in 1999
and 2000, amounting to USD 0.36 and 0.40 per pound of chromium. At the same time, if
comparing prices in 1999 and 2000, prices on the US and European markets added 10%, while
prices on Asian market lost almost 3%.

On the whole, one can state the prices for basic
ferroalloys have reached their low and further decrease seems to be unreal. However, the
situation in the world economy, which is slightly overheated may say the last word. The
decline forecast for development of global economy in 2001 may influence steel production,
which will probably reduce by 1-2% and weaken demand reduction for basic ferroalloys.

In 2000, global market for low-tonnage ferroalloys was very
dynamic. The complex of factors determined processes going on the market. Some of the
factors were not visible. That is why, we will keep on overviewing this market in the
following publications.

Vitaly GNATUSH, expert with DerzhZovnishInform