World Steel Market and Ukrainian metallurgy in 2010

Transcription

1 2-Dec-21 Ministry of Industrial Policy of Ukraine SE UPE Co. Research & Consulting World Steel Market and Ukrainian metallurgy in 21 Vlasyuk V.S. SE UPE Co. Research & Consulting, Ukraine 69 th Session of the OECD Steel Committee Meeting, Paris, 2-3 December 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 1

2 2-Dec Increase of raw materials prices in 21 Itabira fines, 64.2% Fe $/t fob Brazil (to Asian market) $/t fob Australia, Peak Downs 14 $/т 12 Iron ore $/т 3 Coking Coal (1Q) 21 (2Q) (3Q) (4Q) (1Q) (2Q) (3Q) (4Q) 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 Steel cost increase 6 $/t Billet production cost 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 21 production cost growth rate exceeds those one for steel product prices 2

3 2-Dec Excessive steel capacities World capacity and production of crude steel, mln. tonnes capacity steel production est. Source: WSA, OECD, UPE Co. est. Capacity utilization, % 84.2% 84.3% 85.4% 85% 83.1% 475 Mt 81.2% 8% 78.4% Intensive input of new steel capacities has been continued despite of the crisis in and currently about 475 million tons of capacities stay idle due to lack of markets 9% 75% 7% 65% 6% 55% 5% utilization 68.% 74.9% est. 5. Post-crisis changes in the world market. Millstones of competition Overcapacity 84% 82% 8% Capacity utilization % 83,1% 78% Increased production costs 76% 74% 72% 7% before crisis (27) ,9% after crisis (21) Steel cost $/t before crisis (27) after crisis (21) 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 This situation intensifies competition dramatically and bears substantial risks for numerous outdated and non-efficient mills, especially for those not integrated with raw material producers 3

4 3-Jan-7 28-Feb-7 25-Apr-7 2-Jun-7 15-Aug-7 1-Oct-7 5-Dec-7 3-Jan-8 26-Mar-8 2-Aug-8 15-Oct-8 1-Dec-8 11-Feb-9 8-Apr-9 3-Jun-9 29-Jul-9 23-Sep-9 18-Nov-9 2-Jan-1 17-Mar-1 12-May-1 7-Jul-1 1-Sep-1 27-Oct-1 2-Dec Ukrainian crude steel production crude steel production, mln. tonnes * *estimation 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 27) 7. Capacity utilization in Ukraine and in the world Ukrainian capacity utilization % 1% 95.9% 8% 8.7% 73.2% 85% 8% 75% world Ukraine 75.7% 77.1% 78.6% 78.6% 77.2% 78.5% 73.3% 74.2% 71.6% 76.5% 72.2% 71.4% 6% 6.9% 7% 72.6% 72.4% 71.4% 4% 2% 32.7% 65% 6% 67.7% 66.2% 64.9% 61.8% 66.4% % 55% 5% , WSA, OECD Due to changes in the global market and export orientation of Ukrainian steel industry, the level of capacity utilization in Ukraine during 21 was substantially lower than in the world 4

5 2-Dec Steel production cost growth 6 $/t other costs Ferroalloys Natural gas Raw materials delivery Scrap Coking coal Iron ore Domestic price increase for iron ore (+96%), coking coal (+77%) and scrap (+55%) has push up production cost of steel in Ukraine by 137$/t or +4% 9. Decrease of Ukrainian steel export by regions Steel products export, Mt CIS Asia Africa est America Middle East Source: State Statistics Committee of Ukraine, UPE Co. 5. EU Europe (non EU) In Ukraine total export has fallen by 5.5 mln. tons as compared with pre-crisis 27. 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 5

6 2-Dec Apparent consumption in Ukraine (finished steel products) mln. tonnes * * estimation Domestic market in Ukraine remains weak. Under the influence of the economic stress in steel consumption in Ukraine has fallen down to 6.2 Mt or 45% less than in 27. However, this year domestic consumption has started to recover, increasing to 8.2 mln. tonnes 11. Steel import to Ukraine mln. tonnes share of import in the Ukrainian market% import volume % 18.4% 16.2% % % % 3% 25% 2% 15% 1% 5% * * estimation % This year Ukraine has turned back to an active import. In 21 total Ukrainian import of steel products is expected to reach 1.7 mln. tons 6

7 2-Dec Steel demand to renew the accumulated steel resources housing&municipal economy equipments structure & buildings transport infrastructure tube&pipeline (59.3%) 11 (52.3%) (51.7%) (59.5%) (6.2%)* *share of fixed assets with 1% depreciation The replacement of depreciated steel-made facilities requires 33 mln tonnes of steel to be consumed in the domestic market. 13. Corporate ownership in Ukrainian steel sector has changed substantially Arcelor Mittal, ISTIL 8 4; 18% Ukraineothers; 2 995; 7% Russia- MMZ, DSS; 3 353; 7% SCM; 1 38; 23% Russia- IUD; 1 21; 22% Russia- Zaporizhstal 4 445; 1% Russia- DSS, DMRP, DEM ISW 3 248; 7% SCM; 18 15; 39% Zaporizhstal` 4 445; 1% IUD; 8 175; 18% Illich-Stal`; 7 61; 17% Arcelor Mittal; 7 95; 17% Ukraineothers; 2 27; 5% 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 7

8 2-Dec-21 Next year steel production in Ukraine is expected to increase at a modest rate about % After 2 years, impact of the crisis on the Ukrainian steel industry still remains very essential III. Glance at the market Further increase of steel production and price for raw materials Mt % utilization seel production % 75% 1% 9% 8% 7% 6% Itabira fines, 64.2% Fe $/t fob Brazil % 4% 3% 2% forecast Coking coal $/t fob 23 Australia, Peak Downs % forecast World steel production in 211 will make up about 1475 mln. tons and thus beat 21 year record by 6-7 mln. tons. Under the growing demand raw material prices will increase by 25% (iron ore) and +2% (coking coal) % forecast 8

9 2-Dec-21 III. Glance at the market Modest steel price increase in Billet, $/t fob Black Sea average per month average per year 2 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 In 211 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 Steel market: Analytics Forecast Scenario tel/fax (+3844) admin@delphicasteel.com www 9