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SteelOrbis Spring‘ 06 “Steel in the Raw“ Conference & 54th IREPAS Meeting Analysis of the CIS Raw Materials Andrey Pupchenko, Head of Raw Materials Research, Metal Expert Research Group, Ukraine What Metal Expert are: • a part of Metal Courier information agency established in 1996. • a reliable regional source for the CIS steel and raw materials markets. • supplier of daily news, monthly analytical bulletins, quarterly forecasts, special reports and consulting services both in English and Russian. • all the products in English are customized for the needs of the companies and specialists working with the CIS. The main points of the presentation The main focus is on ferrous scrap Steel sector influence on raw materials Forecasts of ferrous scrap consumption and export The main focus is on ferrous scrap The main focus is on ferrous scrap World ferrous scrap deliveries Other suppliers 81% CIS countries 19% Source: International Steel Statistical Bureau The main focus is on ferrous scrap Ukrainian scrap collection decreased in 2005 by 2.2m tonnes vs 2001 figure… 12000 10000 8000 6000 4000 2000 0 2001 ‘000 tonnes 2002 2003 2004 2005 The main focus is on ferrous scrap …whereas consumption in the domestic market increased by 1m tonnes 8000 7000 6000 5000 4000 3000 2000 1000 0 2001 ‘000 tonnes 2002 2003 2004 2005 The main focus is on ferrous scrap Domestic market prevail in Ukrainian scrap deliveries 2004 export 27% domestic deliveries 73% 2005 domestic deliveries 83% export 17% The main focus is on ferrous scrap Correspondingly, export of ferrous scrap from Ukraine decreased substantially 6000 5000 4000 3000 2000 1000 0 1999 2000 2001 2002 2003 2004 2005 ‘000 tonnes The main focus is on ferrous scrap Strategical points of the Ukrainian ferrous scrap industry Obsolete scrap reserves run out A significant consolidation of the market operators took place in Ukraine in 2004-2005 The market is still under the restrictions adopted by government The main focus is on ferrous scrap Ferrous scrap collection in Russia almost stabilized in 2005… 35000 30000 25000 20000 15000 10000 5000 0 2001 ‘000 tonnes 2002 2003 2004 2005 The main focus is on ferrous scrap …although deliveries into Russian domestic market is still growing 20000 15000 10000 5000 0 2001 ‘000 tonnes 2002 2003 2004 2005 The main focus is on ferrous scrap 2004 export 47% The share of domestic market in scrap deliveries have increased in Russia 2005 domestic deliveries 53% export 43% domestic deliveries 57% The main focus is on ferrous scrap 14000 12000 Will huge ferrous scrap export from Russia be sustained? 10000 8000 6000 4000 2000 0 1999 2000 2001 2002 2003 2004 2005 ‘000 tonnes The main focus is on ferrous scrap Strategical points of the Russian ferrous scrap industry the industry still has a great potential the structure of scrap export from Russia is rather diversified moderate export duties (EUR15 or 15%) The future export flows of ferrous scrap from Russia and Ukraine will be defined by: domestic market situation dynamics of world scrap prices Steel sector influence on raw materials Steel export prices - which way to follow: up or down? 700 600 500 400 300 200 100 billets, export HR coils, export Sep 05 Jan 05 May 04 Sept Jan 03 May 02 Sept Jan 01 May 00 Sept Jan 99 May 98 Sept Jan 97 0 Steel sector influence on raw materials Turning point in steel industry – prices to go down surplus of the steelmaking capacities in the world market weakening influence of “raw materials factor” upon pricing due to increase in supplies of raw materials reduction of steel output (and, consequently, the consumption of raw materials) in such regions as EU-25 and North America Steel sector influence on raw materials Turning point in steel industry – prices to go down Consequences prices in the world market of steel products will be preserved in a medium-term perspective at a current, relatively low, level steelmakers will start to compete by reducing production costs Likely bankruptcies of non-competitive producers will result in partial suspension of production facilities further consolidation of buyers of raw materials, i.e. their negotiating positions will be strengthening a growing number of anti-dumping investigations will result in lower export supplies, including those from CIS Steel sector influence on raw materials Will CIS steelmakers continue their growth even at descending world market? Are they competitive enough? What route will be chosen: pig iron or electrometallurgy? Steel sector influence on raw materials Semi-finished steel production cost, $ per tonne EXW 400 350 290 300 250 200 235 300 315 320 310 330 360 245 195 150 100 50 Source: Metal Expert Research, WSD te r n U SA Eu ro pe pa n Ja W es C hi So na ut h Ea K or st ea er n Eu ro pe a In di B ra zi l U kr ai ne R us si a 0 Steel sector influence on raw materials The main competitive advantages of Russian steelworks high quality of raw materials – both coking coals and iron ore in comparison with Ukrainian sufficient investments that have been made by the majority of Russian steelmaking enterprises during recent 5 years - the growth of continue casting share - open hearth furnace replacement The share of steel products deliveries into domestic market is growing Forecasts of ferrous scrap consumption and export Forecasts of scrap consumption and export Raw materials consumption – growth or stabilization? Russia low production costs plans of steelmakers and a number of new projects of mini-mills replacement of open-hearth production will restrain the growth of steel output in Russia Forecasts of scrap consumption and export Raw materials consumption – growth or stabilization? 76000 Steel production is to increase… 74000 Russia: 2004-2007 72000 70000 68000 66000 64000 62000 60000 2004 2005 2006 2007 30000 …ferrous scrap consumption is to grow 25000 20000 15000 10000 5000 0 2004 2005 2006 2007 Forecasts of scrap consumption and export Estimation of ferrous scrap consumption growth in Russia, million tonnes 2006 2007 new steelmelting capacities 3.2 2.65 increased share of continuous casting 0.85 1.2 at current steelmelting capacities Total 0.35 1 4.4 4.85 Estimation: Metal Expert Research Forecasts of scrap consumption and export Estimation of ferrous scrap export from Russia, ‘000 tonnes 14000 12000 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 Forecasts of scrap consumption and export Raw materials consumption – growth or stabilization? Ukraine High production costs A lack of preconditions for more investments in the enhancement of production capacities A need to replace open-hearth production facilities with BOFs Forecasts of scrap consumption and export Raw materials consumption – growth or stabilization? Steel production to remain stable… 45000 40000 Ukraine: 2004-2007 35000 30000 25000 20000 15000 10000 5000 …whereas collection is to decrease 0 2004 2005 2006 2007 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2004 2005 2006 2007 Forecasts of scrap consumption and export Estimation of ferrous scrap export from Ukraine, ‘000 tonnes 3000 2500 2000 1500 1000 500 0 2004 2005 2006 2007 Ferrous scrap availability from CIS countries to decrease substantially in two years period Starting from March 2006, CIS Raw Materials Monthly subscription package includes more extensive information on scrap market - Ferrous Scrap Market Forecast (updated every 10 days) Thank you very much for your attention [email protected]