Transcript Document

Ministry of Industrial Policy of Ukraine
SE UPE Co. Research & Consulting
World Steel Market and
Ukrainian metallurgy in 2010
Vlasyuk V.S.
SE UPE Co. Research & Consulting, Ukraine
69th Session of the OECD Steel Committee Meeting,
Paris, 2-3 December 2010
I. World steel market development
1. Dominating tendencies
1. Expensive raw materials and increasing
production cost of steel
2. Excessive capacities, lack of markets and
strengthen of competition
Presently two powerful factors dominate in the post-crisis market which enhance competition
and worsen cost efficiency of steel producers
I. World steel market development
2. Increase of raw materials prices in 2010
Itabira fines, 64.2% Fe
$/t fob Brazil (to Asian market)
$/t fob Australia, Peak Downs
140
129
$/т
120
350
Coking Coal
$/т
Iron ore
112
300
300
105
100
250
200
76
80
42
55
150
125
46
36
40
209
200
55
60
225
129 129
115
98
100
58
21
20
50
0
0
2004 2005 2006 2007 2008 2009 2010 2010 2010 2010
(1Q) (2Q) (3Q) (4Q)
2004 2005 2006 2007 2008 2009 2010 2010 2010 2010
(1Q) (2Q) (3Q) (4Q)
Source: UPE Co.
Record steel production and increased demand for raw materials have resulted in
iron ore average price raise by 111% and coking coal price raise by 64% y-to-y in 2010
I. World steel market development
3. Steel cost increase
Billet production cost
600
2009
$/t
500
2010
462
543
518
446
432
398
400
325
276
300
200
100
0
Source: UPE Co.
Ukraine
Russia
China
Turkey (EAF)
Upswing of raw materials prices have resulted in substantial increase (+35÷45%) of steel
production costs. By the results of 2010 production cost growth rate exceeds those one for
steel product prices
I. World steel market development
4. Excessive steel capacities
World capacity and production of crude steel,
mln. tonnes
2000
1800
1620
1600
1400
1195
1270
1360
1200
1000
800
600
400
200
970
1069
1 147
1695
1790
1890
1247
90%
85%
475 Mt
1460
Capacity utilization, %
84.2% 84.3%
85.4%
81.2%
78.4%
80%
1415
1346 1329
1218
83.1%
74.9%
75%
70%
65%
capacity
60%
steel production
55%
68.0%
utilization
50%
0
2003 2004 2005 2006 2007 2008 2009 2010
est.
2003 2004 2005 2006 2007 2008 2009 2010
est.
Source: WSA, OECD, UPE Co. est.
Intensive input of new steel capacities has been continued despite of the crisis in 2008-2009
and currently about 475 million tons of capacities stay idle due to lack of markets
I. World steel market development
5. Post-crisis changes in the world market.
Millstones of competition
Overcapacity
84%
82%
Capacity utilization %
83,1%
80%
78%
76%
74%
74,9%
72%
70%
before crisis
(2007)
Increased production
costs
500
after crisis
(2010)
Steel cost $/t
450
452
400
350
365
300
250
200
before crisis
(2007)
after crisis
(2010)
Post-crisis situation in the global steel market is quite different from the pre-crisis one. The main distinction consists in the
availability of two factors unfavorable for producers, namely “excess” of capacities and high production costs. This
situation intensifies competition dramatically and bears substantial risks for numerous outdated and non-efficient mills,
especially for those not integrated with raw material producers
II. Ukrainian steel sector development
6. Ukrainian crude steel production
crude steel production, mln. tonnes
45
40
35
36.9
31.3
33.1
38.7
38.6
40.9
42.8
37.1
34.1
32.1
29.8
30
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010 *
*estimation
Source: UPE Co.
Under the weak market demand the volume of steel production in Ukraine has reduced to the
level of a decade ago (to 32 Mt or 25% less than record pre-crisis production in 2007)
II. Ukrainian steel sector development
7. Capacity utilization in Ukraine and in the world
Ukrainian capacity utilization 2007-2010
world
120%
Ukraine
85%
95.9%
100%
80%
75.7%
80.7%
80%
73.2%
60.9%
60%
75%
32.7%
78.6% 78.6%
77.2%
78.5%
71.6%
72.2% 71.4%
76.5%
72.6%
70%
65%
40%
77.1%
67.7%
66.2%
72.4%
74.2%
71.4%
66.4%
64.9%
60%
20%
73.3%
61.8%
55%
3-Jan-07
28-Feb-07
25-Apr-07
20-Jun-07
15-Aug-07
10-Oct-07
5-Dec-07
30-Jan-08
26-Mar-08
20-Aug-08
15-Oct-08
10-Dec-08
11-Feb-09
8-Apr-09
3-Jun-09
29-Jul-09
23-Sep-09
18-Nov-09
20-Jan-10
17-Mar-10
12-May-10
7-Jul-10
1-Sep-10
27-Oct-10
0%
2007
2008
2009
50%
2010
Source: UPE Co., WSA, OECD
Due to changes in the global market and export orientation of Ukrainian steel industry, the level of
capacity utilization in Ukraine during 2010 was substantially lower than in the world
II. Ukrainian steel sector development
8. Steel production cost growth
600
$/t
462
500
104
400
325
300
200
17
24
104
17
22
30
100
0
38
52
62
2009
39
other costs
Ferroalloys
Natural gas
59
Raw materials delivery
96
Scrap
122
Coking coal
Iron ore
2010
Source: UPE Co.
Domestic price increase for iron ore (+96%), coking coal (+77%) and scrap (+55%) has push up
production cost of steel in Ukraine by 137$/t or +40%
II. Ukrainian steel sector development
9. Decrease of Ukrainian steel export by regions
2007
Steel products export, Mt
2008
Asia
30
28.2
6.0
2010 est.
26.3
25
22.5
3.9
23.5
CIS
Africa
4.3
2.7
3.7
3.3
20
1.9
15
1.0
10
America
0.0
5.0
Middle
5.3 East
2.6
2.7
5
5.0
0
2007
2008
2009
2010
EU27 5.5
4.9 Europe
(non EU)
Source: State Statistics Committee of Ukraine, UPE Co.
In 2009 - 2010 Ukraine total export has fallen by 5.5 mln. tons as compared with pre-crisis 2007. Currently
Ukraine has restored export sales to EU27, Middle East and Asia. EU27 and Middle East are the biggest
Ukrainian trade partners sharing about 23% each
II. Ukrainian steel sector development
10. Apparent consumption in Ukraine
(finished steel products)
30
mln. tonnes
26.1
25
20
15
11.2
10
6.8
5
3.4
4.2
7.5
8.2
9.3
8.7
8.2
6.2
4.9
0
1990
-
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
* estimation
Source: UPE Co.
Domestic market in Ukraine remains weak. Under the influence of the economic stress in 2008-2009 steel
consumption in Ukraine has fallen down to 6.2 Mt or 45% less than in 2007. However, this year domestic
consumption has started to recover, increasing to 8.2 mln. tonnes
II. Ukrainian steel sector development
11. Steel import to Ukraine
mln. tonnes
2.5
share of import in the Ukrainian market%
import volume
30%
2.27
2.06
25%
2.0
1.68
1.5
1.0
15%
0.96
0.95
24.6%
16.2%
0.5
20%
1.41
20.5%
18.4%
10%
15.5%
11.6%
5%
0.0
0%
2005
2006
2007
2008
2009
2010 *
* estimation
Source: UPE Co.
This year Ukraine has turned back to an active import. In 2010 total Ukrainian import of steel
products is expected to reach 1.7 mln. tons
II. Ukrainian steel sector development
12. Steel demand to renew the accumulated steel resources
housing&municipal
economy
110
equipments
69
(52.3%)
structure & buildings
65
(51.7%)
53
transport infrastructure
30
tube&pipeline
0
Source: UPE Co.
20
(60.2%)*
(59.5%)
*share of fixed assets
with 100% depreciation
(59.3%)
40
60
The replacement of depreciated steel-made facilities requires 330
consumed in the domestic market.
80
100
120
mln tonnes of steel
to be
II. Ukrainian steel sector development
13. Corporate ownership in Ukrainian steel sector has changed
substantially
2007
Arcelor Mittal,
ISTIL
8 400; 18%
2010
RussiaMMZ, DSS;
3 353; 7%
UkraineSCM;
10 380; 23%
RussiaZaporizhstal
4 445; 10%
Russia- DSS,
DMRP, DEM
ISW
3 248; 7%
UkraineSCM;
18 150; 39%
Russia- IUD;
10 210; 22%
Ukraineothers;
2 995; 7%
UkraineZaporizhstal`
4 445; 10%
UkraineIllich-Stal`;
7 610; 17%
UkraineIUD;
8 175; 18%
Arcelor Mittal;
7 905; 17%
Ukraineothers;
2 270; 5%
Source: UPE Co.
Current situation on the global steel market requires urgent capital investments in the
modernization of the sector, which could be provided by strategic investors only
II. Ukrainian steel sector development
Next year steel production in Ukraine is expected
to increase at a modest rate about 3.0-3.5%
After 2 years, impact of the crisis on the Ukrainian
steel industry still remains very essential
III. Glance at the market 2011
14. Further increase of steel production and price for raw materials
Mt
utilization
seel production
1600
1415
140
1475
100%
90%
1400
125
100
100
80
1218
80%
1200
75%
1000
120
Itabira fines, 64.2% Fe
$/t fob Brazil
75%
68%
70%
60
55
40
20
60%
800
0
2009
50%
40%
600
250
30%
200
20%
150
10%
100
2010
Coking coal $/t fob
Australia, Peak Downs
2011
forecast
230
191
400
200
0
0%
2009
Source: UPE Co.
2010
2011
forecast
129
50
0
2009
2010
2011
forecast
World steel production in 2011 will make up about 1475 mln. tons and thus beat 2010 year record by 60-70 mln.
tons. Under the growing demand raw material prices will increase by 25% (iron ore) and +20% (coking coal)
III. Glance at the market 2011
15. Modest steel price increase in 2011
Billet, $/t fob Black Sea
650
575
600
516
550
500
450
400
380
350
300
250
average per month
average per year
200
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Source: UPE Co.
2009
2010
2011
In 2011 further steel product prices increase should be expected mainly due to the production cost growth. At
the same time the world market and price will remain under the pressure of the overcapacity and the limited
import demand
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