METALLURGY IN BULGARIA

Transcription

1 METALLURGY IN BULGARIA 2016 SOFIA, 2017

2 CONTENTS SECTION ONE... 6 ECONOMY IN POPULATION, LABOUR MARKET, WAGES GDP, GVA, PRODUCTIVITY ENERGY CONSUMPTION FOREIGN TRADE EXCHANGE, IMPORT AND EXPORT OF GOODS METALLURGICAL INDUSTRY IN EU AND IN BULGARIA SECTION TWO FERROUS METALLURGY IN BULGARIA PRODUCTION OF FERROUS METALS AND ROLLED FERROUS METALS STEEL PRODUCTION IN EU AND IN THE WORLD FOR CRUDE STEEL PRODUCTION IN BULGARIA PRODUCTION OF ROLLED FERROUS METALS TRADE TURNOVER AND CONSUMPTION OF RF METALS AND PRODUCTS IMPORT OF SCRAP, RFM AND PRODUCTS EXPORT OF SCRAP, RFM AND PRODUCTS FOREIGN TRADE TURNOVER OF ROLLED FERROUS METALS AND FINISHED PRODUCTS DOMESTIC SALES OF RFM AND FINISHED PRODUCTS REAL HOME CONSUMPTION OF STEEL PRODUCTS PRODUCTION AND CONSUMPTION OF REFRACTORY ARTICLES AND MATERIALS METAL CASTING SECTION THREE NON-FERROUS METALLURGY IN BULGARIA PRODUCTION OF NON-FERROUS METALS PRODUCTION OF ANODIC AND ELECTROLYTIC COPPER LEAD PRODUCTION ZINC PRODUCTION PRODUCTION OF PRECIOUS BY PRODUCT METALS, ALLOYS AND CHEMICAL PRODUCTS PRODUCTION OF ROLLED/PRESSED NON-FERROUS METALS AND ALLOYS IMPORT OF NON-FERROUS METALS AND FINISHED PRODUCTS EXPORT OF NON-FERROUS METALS AND FINISHED PRODUCTS FOREIGN TRADE TURNOVER OF NON-FERROUS METALS SALES OF NON-FERROUS METALS AND R/P METALS CONSUMPTION OF NON-FERROUS METALS AND ALLOYS MEMBERS AND MANAGEMENT OF BAMI... 76

3 For 25 years the annual edition of the Bulgarian Association of Metallurgical Industry (BAMI) has been giving an objective characteristic for the state and changes in the production, trade and consumption of metals and metallurgical products. It is intended for managers and experts in the companies BAMImembers, but is also used by a wide range of external specialists. The BAMI team prepared the "Metallurgy in Bulgaria 2016" thanks all heads of member companies for the information provided on their activities and data on their production and realization, as well the Ministry of Economy for the assistance in the preparation of the import/export analysis. Additionally to the data from national sources, in the publication there is information used from external sources, such as Eurostat ( Eurofer ( World Steel Association ( Eurometaux ( and other international organizations active in the field of the ferrous and non-ferrous metallurgy.

4 THE FOLLOWING ABBREVIATIONS HAVE BEEN USED IN THE ANNUAL ASSI - Average Social Security Income AC - Apparent Consumption BAMI - Bulgarian Association of the Metallurgical Industry BCLA - Branch Collective Labour Agreement BNB - Bulgarian National Bank CEA - Classification of Economic Activity CEE - Central and East Europe C.I.S. - Community of Independent States (former USSR) CR - Cold-rolled (rolled steel) ETS - European emission trading scheme GDP - Gross domestic product GVA - Gross value added HNFM - Heavy non-ferrous metals HR - Hot-rolled (rolled steel) ICSG - International Copper Study Group ILZRO - International Lead and Zinc Research Organization LME - London Metal Exchange MF - Ministry of Finance MSST - Minimum Social Security Threshold NCEA - National Classification of Economic Activity NF - Non-Ferrous NFM - Non-Ferrous Metals NRA - National Revenue Agency NSI - National Statistic Institute NSSI - National Social Security Institute p.e. - petroleum equivalent PP - Purchasing Power RFM - Rolled Ferrous Metal (steel) RHC - Real Home Consumption

5 DEAR LADIES AND GENTLEMEN, It is my pleasure to present you Metallurgy in Bulgaria in the annual edition of the Bulgarian Association of Metallurgical Industry. For 25 years we are maintaining the tradition of preparing and offering our members and partners an yearly analysis of the production of ferrous and nonferrous metals and metallurgical products, and comparative data on the economy of Bulgaria and the European Union as well. With this edition BAMI is performing one of its main tasks - to be useful to its members by collecting and providing specialized information about the general development of the metallurgical industry, the achievements, the problems and the changes made. It is one of our goals to be helpful assisting the companies in the implementation of their programs and to introduce these to the Bulgarian and European citisens. This is also a special part of the information and communication policy of the industry, making visible the development, the changes and investmenst in new capacities and modern technology for a better working conditions and environmentale protection. Today the metallurgical industry is a major sector of the Bulgarian economy. As a result of the investments made, the companies achieved increased capacity, better quality and competitiveness of their production - both metals and metallurgical products, resulting in good positions on the EU and world markets. This is crutial, considering the export orientation of the Bulgarian metallurgy and its high dependence on the EU and world economy and on the realization in third countries. The past year 2016 was characterized by a changing political and economic environment both nationally and internationally. Early elections were held in the country, the emigration pressure from the Middle East and North Africa on Europe continued, the problems with the metal prices and their downward trend remained. Nevertheless the branch indicators are good, the metallurgical production provided growth in value added, it has retaied high values and significant share in the country's export, jobs were preserved. The achievments are part of the goals set, the metallurgy continues its development towards sustainability. Finally I would like to thank everyone who has contributed to this publication.i believe that the information is useful for the management and the metallurgists in the country as well for our Bulgarian, European and foreign partners. Yours faithfully, ANTON PETROV Chairman of the Board

6 SECTION ONE ECONOMY IN 2016 (SHORT REVIEW BULGARIA, EU) 1. POPULATION, LABOUR MARKET, WAGES The political and economic situation in Bulgaria, in the region, in Europe and in the world in 2016 could be defined as relatively successful in economic terms but very unstable from political point of view; a relatively sustainable for the recent years growth was achieved. Military conflicts in the Middle East continue, there are political turbulences in neighboring countries, the sanctions against Russia remain. All these hinder stability and predetermine a significant inflow of immigrants from the crisis regions to Europe and for the continuation of internal migration processes within the member states, as well. Such a move of people looking for better living conditions who are not creating gross product and value added but are mainly beneficiaries of budget funds and social rights has a negative effect on the European economy - it does not stimulate development but is leading to crises, different in size and characteristics. In this international environment the Bulgarian economy and industrial producers are looking for realization and development opportunities. In the country there are additional problems related to delayed reforms and policies in key sectors - education, health, justice, regional and demographic development. These factors are obstacles for growth and investmens with a low rate of development in 2016, too, such kind of growth is not enough to move closer to the EU average indicators. Demographic indicators for Bulgaria continue to decline, both in terms of population size and in age and educational characteristics. In medium and long term this is a very important factor for the country and its future. Modern techniques and technologies require a high educational level of the workforce - a determining factor for the sustainable development of the country. This can only be achieved in a case of population growth, increasing the number of active young people and their participation in economic life. Figures for the last five years shown in Table 1.1 show a steady drop in the population, for 2016 it is 52 thousand people. From the beginning of the transition the trend has been negative. In the period the population is decreasing by more than 65 thousand on annual average. Since the beginning of the 21st century the overall change in the number of the population is large, the population decreased by 1,047 million people, as shown in Fig.1.1.

7 Population groups: Table 1.1 Population by categories, thousand people X 1,000 X 1,000 % X 1,000 % % X1,000 % City/town population Village population Males Females Total: Source: NSI The ratio urban-to-rural is 3 to 1, changing steadily to the benefit of urban residents. Villages continue to be depopulated. Figure 1.1 Population of Bulgaria, million people Among all EU member states Bulgaria has the highest negative values in natural growth. This explains the most unfavorable age profile of the population. For 2016 the group of year olds, i.e. the most promising part of labor force in Bulgaria, has a share of 9.6% - the average for the EU (28) is 11.1%. In the opposite - the age group over 65 in Bulgaria has a high relative share of 15.8%, for the EU (28) the average value is 13.8%. No single indicator of the demographic characteristics was improved over the years and the country's crisis is deepening. This also creates an unfavorable business environment and conditions for the development of the industry,

8 hinders the realization of new investment intentions by national and foreign business. Another demographic indicator relevant to quality and standard of life is the average life expectancy of the population in a respective country. This indicator is again below the EU(28) average and Bulgaria is at the last place among all EU member states. According to NSI data the average life expectancy in the EU(28) for 2015 is 80.6 years, for Bulgaria it is 74.7 years or the average Bulgarian citizen lives 6 years less. The citizens of Spain live the longest - 83 years, followed by the Italians with 82.7 years. In the neighboring Balkan countries the average life expectancy is also higher - in Greece it is 81.1 years, in Romania 75 years, in Macedonia 75.5 years, in Turkey 78.2 years and in Serbia 75.3 years. In line with the demographic characteristics, the labor market is also changing. In Table 1.2 data are presented on the average annual number of employees with labor and service contacts, on labor income and on some social parameters for Table 1.2 Average number of employed people, level of unemployment, inflation Indicators Average annual number of persons (national calculations), in thousands Average annual number of registered unemployed, in thousands Average annual level of unemployment (NSI),% Inflation/ deflation rate Average monthly wage of persons on labor and service contracts in the country, BGN: public sector - private sector - incl. processing industry Average monthly wage in activity 24 Production of basic metals : ferrous metallurgy non- ferrous metallurgy metal casting Source: NSI

9 From the data about the employed people in 2016 and the changes compared with previous periods the following conclusions could be drawn: After 2013 the number of employees marks an increase that lasts for three consecutive years up to In 2016 there is a decrease in the number of workers - by 23 thousand less compared to the previous year In parallel the number of registered unemployed is also decreasing, respectively the unemployment rate drops from 9.1% to 7.6%. These data call for contradictory conclusions that are not giving a clear picture of the the labor market s status. There is a decrease in the number of employed persons, while the number of registered unemployed is also reducing. The reason is due to the impact of other side factors, such as the negative growth and the declining in the working population in Bulgaria, as well as the migration outside the country of young people in working age. As a matter of fact the labor market is worsening. There is no clear long-term trend for growth of the average annual number of employed persons despite the fall of the unemployment. The ratio between the newly created jobs and the reduction of the existing ones is not positive, the weak economic development does not create enough new jobs. Over the whole period under review, the income of the employees under labor and service contacts is increasing. The average monthly salary in the country in 2015 compared to the previous one is increased by 56 BGN and only for the processing industry - by 61 BGN. In 2016 compared to 2015, the increase in absolute value reached BGN, it is a growth of ca. 10%. The salaries in the public sector are higher than in the private, but there is a tendency for this difference to decline. In 2016 this difference was only 30 BGN on an annual basis, compared to 63 BGN for the previous The public sector reported a smaller annual growth of 6% compared to 11% in the private sector. In the processing industry the reported growth was 11.2%, significantly outrunning the growth of the productivity. The average salary and the average insured income in the metal and HRM industry are still of the highest in the country. In 2016 the average salary in the whole economic activity 24. Production of basic metals is 1.5 times higher than that in the proceeding industry and only in the non-ferrous metallurgy - more than 2 times. According to NSI preliminary data for 2016 the average wage in non-ferrous metallurgy (1 724 BGN) is higher than in the mining (1 377 BGN) and in the energy sector (1 684 BGN).

10 The enterprises of the metallurgy and related industries, as well as all BAMI member companies share common social values and policies by maintaining an active dialogue with the partners of the national trade unions. In the sector there are permanently operating Sectoral Collective Labor Agreements (BCLA). In the last Agreement concluded for the period , the Minimum Wage for employees in the main proceedings was increased by BGN a growth of 122%. Higher values have been agreed for other additional payments and social benefits. The figure below (Fig.1.2) presents the employers costs per hour for labor in BGN for employees under labor and service contracts in 2015 in the main sectors of industry compared to the average costs of all economic activities in the country. Shown are the same costs of the employers in the steel and nonferrous metallurgy and in the IT sector as the highest wage sector. Figure 1.2 Source: NSI Labor costs, BGN for one working hour The highest and close in value are labor costs per hour in the energy sector, information technology and non-ferrous metallurgy. Above average are also these costs in the mining (almost 2 times) and in the steel industry (1.5 times).

11 1.2. GDP, GVA, PRODUCTIVITY For ten consecutive years after Bulgaria became a member of the EU our country is the last one on GDP/GVA per capita, including the Standard Purchasing Power (SPP). The reported annual growth in the economic performance does not change this position. In 2016 the average real growth of the world economy is 3.1%, for the EU (28) economy it is 1.9%; for Bulgaria the real growth is 3.4% (for %), according to MF data. The real GDP per capita produced in 2016 in the EU (28) is EUR, in Bulgaria EUR, i.e. 4.5 times less. Among all EU member states only Romania reports similar figures EUR, but in 2016 Romania is getting ahead in the absolute value of GDP by EUR per capita and the annual growth compared to the previous period is higher - 5.6% for Romania and 5.3% for Bulgaria. For all other EU member states the GDP is ca EUR per capita, in 11 of them the values are above the European average - they are reaching ca EUR per capita. After almost 8 years of GDP decline, in 2016 Greece recorded a small growth of 0.6%, reaching a value of EUR per capita and this is almost 3 times more than that in Bulgaria. Similar is the ranking of the EU member states' GDP per capita in standards of purchasing power (SPP). For all years of the EU membership, incl Bulgaria is at the lowest level and still below 50% of the average. For 2016 GDP on standard PP is only 48% of this in the EU (28). According to NSI and EUROSTAT data for 2016 this indicator is for Romania 59%, for Poland - 69%, for Hungary - 67%, for Croatia - 59% and for the Czech Republic - 88%. Figure 1.3 shows the indicator GDP per capita in SPP in 2016 for all member states as a percentage of the EU(28) average, assumed as100. The top 11 countries in the chart which are above the European average (green line) are actually those from Western Europe. The remaining below the average SPP are the countries of Southern and South-eastern Europe. The difference between the highest and the lowest values is about twice. Up to now the support schemes implemented under different EU structural funds and operational programs have not changed the position of Bulgaria in this ranking (48%), and ten years after entering the EU this indicator remains the lowest and below 50%.

12 In Romania after 2008 the GDP per capita in SPP is over 50%, reaching in % of the EU(28) average. To overcome these large differences, which are causing an internal migration within the EU, a more active European regional development policy is needed. Figure 1.3 GDP per capita in Standard Purchasing Power, EU(28)=100 Source: Eurostat, NSI The values of produced in Bulgaria Gross Domestic Product and Gross Value Added by some economic activities for the last four years are given in Table 1.3. The Gross Value Added (GVA) is million BGN and the Gross Domestic Product (GDP) million BGN. In 2016 the share of industry in the total GVA of Bulgaria is 23.8% and in the GDP %. For industry (manufacturing and construction) this share is 28% in GVA and 24% in GDP respectively. Agriculture produced a relatively low rate - 4.4% of GVA and 3.8% of GDP in 2016 and for a second year there is a decrease to be seen in the indicators compared to these in previous periods. Gross domestic product, which is formed by the added value of the Bulgarian economy (86.3%) and of taxes (13.7%) shows in recent years a constant growth - in 2016 compared to 2015 the total increase is by million BGN or

13 104.4 %. The growth is driven by increased value added ( million BGN) in all economic activities (without agriculture) and services, as well as by adjustments/taxes (+ 673 million BGN). GDP and GVA by sectors and groups, million BGN Indicies: * Table 1.3 % of GDP Gross Value Added (GVA) current prices, million BGN, incl - agriculture and forestry - mining and processing industry - power generation, water and sanitation (В-Е) - construction (F) trade, food, transport and communications (G-J) - finance, insurance, real estate and other business services (K,L,M,N) - public administration, education, public healthcare (O-Q), others (R-U) ============================= - adjustments/taxes ====== ====== ===== ====== === 13.7 Gross Domestic Product (GDP), million BGN GDP per capita, BGN Source: NSI, * preliminary data The latest official NSI data on production volume in value and other key economic indicators are for the year 2015; in Table 1.4 they are shown for a period of four consecutive years and by industry sectors.

14 Table 1.4 Key economic indicators CEA 2008 / INDICIES INDUSTRIAL PRODUCTION TOTAL Mining/Sector В/ - produced output, million BGN З value added, million BGN employees, number value added per employee, thousand BGN Processing industry /Sector С/ - produced output, million BGN value added, million BGN employees, number value added per employee, thousand BGN Production of basic metals - produced output, million BGN value added per employee, thousand BGN incl. in the NF metallurgy, thousand BGN Power generation /Sector D/ - produced output, million BGN value added, million BGN employees, number value added per employee, thousand BGN Water supply, sanitation, waste management /Sector Е/ - produced output, million BGN value added, million BGN employees, number value added per employee, thousand BGN Source: NSI

15 The biggest share of the total output produced in the country is due to the processing industry, including the metallurgical industry. In 2015 industrial output was produced worth BGN million, with BGN million more than in Increased was mainly the production of the processing industry - by BGN million, the contribution of the metallurgical industry was ca. 100 million BGN of them. Power production accounted an increase of 624 million BGN and the contribution of the water and waste management sector was 62 million BGN. The indicators in the Table show a high relative share of the metallurgical production, both in the volume of the processing industry (14%) and in the total industrial production of the country - a share of 11.2% for The value added per employee in the metallurgy for the last two years is growing, following a drastic fall in 2012 as a result of the rising electricity prices in the country and a decline in metal prices on the international markets. Despite these unfavorable factors, the values are more than twice the same indicator for the processing industry and for the water supply and waste management sector, and exceed those of the mining. The production of non-ferrous metals, alloys and products from them is one of the most promising and high-performing industrial activities, which contributes not only to the achievements of the Bulgarian economy, especially to export s value, but also to the base industry key indicators of the EU. As a result of the investments made and the high-tech development of the non-ferrous metallurgy, the value added per employee reached in thousand BGN. According to NSI data, this is the highest indicator of all industrial activities in the country, with sustainable growth and exceeding the values in the energy sector. The main technological and economic indicators in Bulgaria's non-ferrous metallurgy are characterizing the activity as competitive and with development potential, highly important for the national and the EU economy ENERGY CONSUMPTION Metallurgical industry is characterized by high energy consumption due to high temperature processes of the metal smelting and electrolytic refining. This makes the metal production strongly dependent on national regulations and policies, on the energy market and energy prices. There are other factors that reduce the effect of these external dependencies based on new modern energy efficient equipment and technologies. These processes of innovative renovation of the productions are strongly represented in

16 the Bulgarian metallurgical enterprises and a constant goal in their investment plans and policies Energy intensive industries through their organizations at national level have actively worked for several years to apply EU practices for compensation of their costs due to the increased energy prices. As a result ORDINANCE Е- RD-04-06/2016 is adopted on the reduction the burden related to the costs of energy from renewable sources. The supporting scheme is operative for the period August 1, 2015 to December 31, 2020 and the amount is being fixed for each pricing period. In the last NSI energy balance for 2015 the industry reports total energy consumption of thousand tons of petroleum equivalent (p.e.) - it has an increase of 95 thousand tons p.e. compared to By type of energy resources the highest share has the natural gas thousand tons p.e. or 34%, followed by electricity with 769 thousand p.e. and 28.5%. The remaining quantities and shares are of other types of energy sources, such as solid and liquid fuels, thermal etc. The total consumption of energy resources in households is 82% of that in the industry and amounts to thousand tons p.e., with a clear trend of increased share of the consumed electricity (41.3%) on the account of other fuels. The amount of household electricity consumption already exceeds that from the industry by 146 thousand tons p.e. Households show low consumption of natural gas and it is only 2.3% of their energy balance. High electricity consumption is due to the existing cross-subsidization of prices for household consumers by the industry and does not stimulate demand for other alternatives. The implementation of policies and projects for changing in the energy mix is an unrealized potential for improving the energy efficiency in households and for reducing greenhouse gas emissions. The total energy consumption in metallurgy is 243 thousand tons p.e. 14 thousand tons p.e. less than in 2014 (257 thousand tons p.e.); it represents 9% of the total industrial consumption in the country, the share in the previous year was 10%. The total energy consumption in metallurgy has decreased over the past 10 years more than twice. These changes are due to two main factors the closing of old productions and the realized innovations/investments in new energy-efficient capacities and technologies. In the two sub-sectors the total energy consumption is respectively 55% of the non-ferrous metallurgy (133 thousand tons p.e.) and 45% (110 thousand tons p.e.h) of the ferrous metallurgy. Despite the improved energy efficiency, the consumption of electricity in the ferrous and non-ferrous metallurgy (135 thousand tons p.e.) is higher than

17 that of other sectors of the Bulgarian industry and represents 18% of the total industrial energy consumption. The chemical and food industries follow with a share of 15% and 13%, respectively. Natural gas (81 thousand tons p.e.) is mainly consumed in the ferrous industry (61%) and in the non-ferrous industry it is used in the production of rolled metals and products of non-ferrous metals and alloys. The share of the natural gas used by the metallurgical industry in the total non-energy industrial consumption for 2015 of the country is 9%, compared to 10% in the previous period. Figure 1.4 shows the dynamics of the energy consumption in total and separately for the ferrous and non-ferrous metallurgies over the last five years. Figure 1.4 Energy consumption in the metallurgy, thousand tons p.e. The implementation of the best available techniques and technologies does not change the energy intensive nature of the metallurgical processes. Therefore the high share of metallurgy in the total volume of industrial production leads to a higher energy intensity of the economy. This specific structure will remain in the coming years, respectively the energy cost per unit of GDP will be higher than the EU average FOREIGN TRADE EXCHANGE, IMPORT AND EXPORT OF GOODS The metals and metallurgical products of ferrous and non-ferrous metals and their alloys have a high value in the export of Bulgaria - for many years they have a predominant place in the portfolio of the country for the markets of the European Union and other regions of the world.

18 For export are all metallurgical products, such as rolled ferrous metals, electrolytic copper, zinc, lead, rolled and pressed products from heavy and light non-ferrous metals and various supporting industries, too. Although such export characteristics have other sectors of the Bulgarian industry, too, the foreign trade balance of the country in the goods exchange shows a negative value. This deficit is decreasing in recent years but is still in the order of some milliard BGN. Data on Bulgaria's imports and exports over the past five years are given in Table The values of imported and exported metallurgical products (including metal waste) for the same period are also mentioned. Foreign trade balance in the goods exchange, milliard BGN Indicators: Import of goods, incl. from EU (28) metal products relative share, % Export of goods, incl. for EU (28) metal products relative share,% Foreign trade balance, incl. - matal products , Source: NSI, SITB; Customs statistics, NRA As an indicator of competitiveness and growth of the Bulgarian economy, the total goods export shows for 2016 an increase in value 600 million BNG compared to 2015 (1.3%); the import of goods decreased by 600 million BGN (less than 1.2%). As a result, the negative foreign trade balance decreased by 1.2 milliard BGN, reaching the lowest level of -4.9 milliard BGN over the last ten years. Metals and metallurgical products have maintained a high relative share for years, which has reached 16-18% in the years before the economic crisis. As a result of the declined production in the period of the crisis and thereafter and of the fall in the metals prices on the world markets, this share changed reaching 13.2% in 2015 and 11.1% in 2016 respectively. Foreign trade goods turnover formed a positive balance amounting to several milliard BGN and has contributed to improving the country's foreign trade performance. Figure 1.5 shows values of total exports and export by type of metals and metallurgical products in the last years. +1.6

19 Figure 1.5 Export of metals and metallurgical products, million BGN After 2011 the trade balance in the ferrous industry is negative, with a trend the difference to increase both in value and in nature. The closure of large metallurgical capacities limited the production of steel products and products by type and range, so imports remain significant in order to cover the domestic consumption. The non-ferrous metallurgy continued its development and changed the appearance of the Bulgarian metallurgy. Nowadays it is characterized by a high specialization in the production and processing of non-ferrous metals and alloys and is giving a specific characteristic of the whole Bulgarian economy, and has its contribution to the European Union's metallurgical industry. In the last years foreign trade of non-ferrous metals has a positive balance of 3-4 milliard BGN. According to official BNB export data presented in Table 1.6 for the period , non-ferrous metals, with the exception of the last year, have the highest value of all types of goods by individual groups. In 2016 there was a decrease in the quantities and in values of the exported non-ferrous metals (-1milliard BGN), as a result of which the value of the exported raw materials for food production (mainly grain crops) became higher.

20 Foreign trade export by goods groups, million BGN Table 1.6 Goods groups Consumer goods, incl Foods Cigarettes Beverages Clothes and shoes Pharmaceuticals and cosmetics Furniture Other consumer goods Raw materials, incl Pig iron, iron and steel Non-ferrous metals Chemical products Plastics, rubber Fertilizers Textile materials Raw materials for food production Wood and paper, cardboard Cement Tobacco Other raw materials Investment goods, incl Machines, apparatus Electrical machines Vehicles Spare parts and equipment Other investment goods Total non-energy stocks, incl Total energy resources Petroleum products Other different of petroleum products Other Total export Source: BNB The export of petroleum products is commensurate with export of metallurgy and grain crops but due to the decline in international petroleum prices, values are declining over the mentioned period. Despite the big export of the energy resource stock group, its foreign trade balance was negative, amounting to several (3-4) milliards BGN over the years.

21 1.5. METALLURGICAL INDUSTRY IN EU AND IN BULGARIA Modern world is impossible without metals, alloys and products of them. They are important raw materials in the value chain in all industry branches energy, renewable energy sources, investment machinery, electronics and electrical engineering, transport, construction, informatics and telecommunications, households, etc. Metals are high recyclable and this allows their multiple processing and an almost endless cycle of use. Therefore they are in the focus of the EU in implementing resource efficient policies and a move to a circular economy. Countries and regions with developed economy are trying to reduce their dependence on external supplies and to provide important industries with own metal raw materials. This is also the policy of the EU and of its member states. Therefore metals are taking a significant share both of the EU(28) and of the member states production. Through trade policy, the protection of European markets is being implemented from unfair and subsidized imports from third countries, which is already a problem for Europe's economy. Similar processes are observed in many sectors and the import of metals continues to grow. A reason for this is also the 'leakage' of production to other regions due to high demands on European producers. Asia (mainly China), is the largest producer of metals, with more than 50% of the world steel, copper, zinc and lead production. In this new economic environment, the EU has placed the renaissance of the industry on the agenda. Policies and measures are taken to protect European production from unfair imports of metallurgical products from third countries, including China. Regardless of these, the value of output in activity 24. Production of basic metals for the whole EU(28) over the period has decreased by EUR 57 milliard, a drop of more than 17%. The output in metallurgy produced in 2015 in EU(28) is worth EUR milliard, Bulgaria production was worth EUR 3.8 milliard, which represents 1.2% of the EU(28) total. Among the member states of the EU our country occupies the 16th place in value of metallurgical production. Germany is the largest producer of metals with a production worth EUR 92.4 milliard and a share of 28%, followed by Italy with a total production of EUR 55.3 milliard (17%), France (EUR 27 milliard) and Spain (EUR 24 milliard). Other major producers are the UK (EUR 21.9 milliard), Belgium and Austria. From the new member states Poland has the highest volume - EUR 10.7 milliard, followed by the Czech Republic with EUR 6.8 milliard. Close to Bulgaria are Greece - EUR 4.2 milliard, Romania - EUR 3.8 milliard and Slovakia - EUR 3.8 milliard.

22 The relative weight of steel and rolled ferrous metals is much bigger in the structure of the EU metallurgical sector than that of the non-ferrous metallurgy. Figure 1.4 shows this ratio for the EU (28) and Bulgaria, according to EUROSTAT data for Figure1.4 Structure of CEA 24.Production of basic metals in EU and in Bulgaria In 2015 the produced ferrous metals and HRMs within the EU is worth milliard EUR, milliard EUR was worth the production of the non-ferrous metals and of the casting 37.5 milliard EUR. Metallurgy in Bulgaria is highly specialized in the production of non-ferrous metals and this trend has been growing over the years - in 2014 the non-ferrous metallurgy has a relative share 82.4% and in the year 2015 it is 84.5%. The total EU steel production shows a drop by almost 23% after the economic crisis but still retains its second place in the world with a volume of 162 million tonnes in This is significantly less - only 20% of the annual output of China with over 808 million tons crude steel. The problems of the steel industry the European Union are related to the rising electricity prices as a result of the implementation of climate policies (Renewable Energy Sources, ETS) as well as liberalization of trade with third countries, unfair and dumped imports of steel products from China, Russia, Ukraine and others. Being export oriented the Bulgarian steel industry is also influenced by these processes - in the last five years the quantity of crude steel produced a decrease by 35% is reported. The produced non-ferrous metal, alloys and products of them in 2015 in Bulgaria are worth 3.2 milliard EUR a share of 3 % of the total EU production under CEA 24.4.

23 The Bulgarian production of non-ferrous metals (copper, zinc, lead), HR nonferrous metals and alloys has a high contribution not only to the national economy, but is having a high relative share of total EU production. Values of non-ferrous metals and products produced by the EU member states are as follows: Country Value, milliard EUR 2014 г г. Share, % TOTAL EU(28), incl Germany Italy Spain Belgium France UK Sweden Austria Bulgaria Greece Poland other countries Source:Eurostat, April 2017 Bulgaria occupies the 9 th place in the EU production value ranking of nonferrous and precious metals. The non-ferrous metals produced by each of the other 17 non-listed countries were worth around and below EUR 1 milliard. As a result of reduced production and falling prices on the international markets the value of non-ferrous metals produced in the EU in 2014 is decreasing by16 milliard EUR (13%) compared to Data about the basic non-ferrous metals produced in 2015 show that the EU is the third world producer of electrolytic copper and lead with a share of 16.5%. The EU is the second largest producer of zinc with 15.0% of total world production. The Bulgarian metallurgy has a contribution for these prestigious places in the world economy rankings - it provides 8.5% of the electrolytic copper and 15% of anode copper in the EU; for block zinc this share is 4% and for lead - 5.5%. Bulgarian metallurgy is restructuring and developing on the basis of the best techniques and technologies towards competitiveness with a potential to be an industrial pillar for the country's economy and a basis for the development of a number of modern new industries.

24 SECTION TWO FERROUS METALLURGY IN BULGARIA 2.1. PRODUCTION OF FERROUS METALS AND ROLLED FERROUS METALS STEEL PRODUCTION IN EU AND IN THE WORLD FOR 2016 Non-ferrous metals and alloys, rolled metal and their products are most widely used in important industrial sectors and in the household. They are the main raw material for the production of machines, equipment and tools, widely used in the automotive and transport engineering, in construction and energy sector. The capability of a national steel production to meet the domestic consumption is important for any developed country, making the sector particularly sensitive to fair international competition and market rules. In 2016 the total world crude steel production is million tons - compared to 2015 it is reduced by 10 million tons (2.5%). For years incl. 2016, China ranks first in terms of steel production (808.4 million tons) - this is 50.2% of the whole world production. The EU(28) production is on the second place in terms of volume - a little over 10%. Following is Japan million tons, India - 96 million tons, the USA million tons and Russia with 71 million tons. Within the European countries the largest producers are: Germany - 42 million tons, Turkey - 33 million tons, Ukraine - 24 million tons and Italy - 23 million tons. Figure % 6.5% 20.4% China EU Japan 50.2% India USA 6.9% Other 10.1% Main world producers of crude steel, by countries, million tons, 2016

25 The world's largest steel producers are corporate structures; for 2016 they report crude steel production, as follows: 1. Arcelor Mittal million tons 2. China Baowu Group million tons 3. HBIS Group million tons 4. NSSMC million tons 5. POSCO million tons 6. Shagang Group million tons 7. Ansteel Group million tons 8. JFE Steel million tons The crude steel producer in 2016 in the EU was thousand tons thousand tons less, compared to the production in the previous year this is a drop of 2.5%. The steel industry in the EU is reporting almost constant decrease from the beginning of the economic crisis, with total annual production decrease by more than 48 million tons compared to For the same period, the number of employees in the sector was reduced from 403 thousand people to 319 thousand and this process continues - only in 2016 the number of employed persons is less than those in The EU member states with a relatively high share of total crude steel production are: - Germany 26 % - Italy 14.5 % - France 8.9 % - Spain % - Poland 5.5 % - Belgium 4.8 % - UK 4.7 % The closure of capacity for liquid steel in Bulgaria has placed our country in the small producers' group, our production is comparable with this in Slovenia (about tons). Among the member states in the region, the production in Greece is higher - over 1 million tons and in Romania - over 3 million tons. From the new countries in Eastern Europe, more significant producers of liquid steel are Slovakia with about 5 million tons, the Czech Republic - over 5 million tons and most of all Poland - with an annual output of about 9 million tons. Bulgaria's share of EU liquid steel production in 2016 is 0.33%, maintaining the 2015 level. Data mentioned above are taken from publications of Eurofer ( and of the World Steel Association (

26 2.1.2 CRUDE STEEL PRODUCTION IN BULGARIA Only Stomana Industry JSC is producing crude steel in the country. The steel is produced in electric furnaces from scrap. In 2016 the quantity of crude steel produced was thousand tons this is a decrease of 15.8 thousand tons (2.9%) compared to 2015 (Figure 2.2). Figure 2.2 Steel production in Bulgaria, thousand tons After continuous casting the produced liquid steel passes for further processing in hot rolling mill for flat and long products as well as different types of articles from them. The investment objectives and policies of Stomana Industry JSC are aimed at improving of the production processes, protecting the environment and ensuring better health and safety working conditions, installing of new facilities and replacing parts of the equipment. The programs foresee a priority increase of the production and assortment of rolled products, as well as extended use of sheet metal. In 2016 the company made investments worth BGN 12 million in the following main directions: 1. "Depot for hazardous and non-hazardous industrial waste" has been completed. Starting the operation of this new installation, an extremely important problem for the region and the country is solved, ensuring the safety storage and disposal of different types of waste according to the best available techniques. 2. Installation for cutting of hot-rolled flat sheet metal 3. Completion of some stages of a 5S system 4. Reconstruction of a rolled metal production line 5. Software upgrade, water cycles improvement, fire safety etc.

27 PRODUCTION OF ROLLED FERROUS METALS In Bulgaria producers of rolled ferrous metals (RFM) are Stomana Industry JSC and Promet Steel JSC. Flat HR is produced only by Stomana Industry JSC; long HR is produced by Stomana Industry JSC and Promet Steel JSC. Production of rolled ferrous metals (RFM) by assortment, thousand tons RFM assortment: Companies: Table /15 +/- 2016/15 % Promet Steel JSC 235,8 381,0 343,6 329,1 417,1 88,0 126,7 HR long Stomana Industry JSC 291,8 272,3 286,4 292,5 322,0 29,5 110,1 Helios Metallurg Ltd 15,4 26,4 34,0 0,0 0,0 0,0 0,0 Total: 543,0 679,7 664,0 621,6 739,1 117,5 118,9 HR flat Stomana Industry JSC 275,3 194,1 273,0 212,9 182,1-30,8 85,5 Promet Steel JSC 235,8 381,0 343,6 329,1 417,1 88,0 126,7 HR metals (total) Stomana Industry JSC 567,1 466,4 559,4 505,4 504,1-1,3 99,7 Helios Metallurg Ltd 15,4 26,4 34,0 0,0 0,0 0,0 0,0 Total: 818,3 873,8 937,0 834,5 921,2 86,7 110,4 Source: Company data The total production of rolled ferrous metals (RFM) in 2016 in Bulgaria is thousand tons; there is an increase by 86.7 thousand tons or 10.4% compared to Figure 2.3 Production of rolled ferrous metals (RFM), thousand tons thousand tons of long rolled and thousand tons of flat rolled steel were produced in 2016 in the country. By the flat rolled steel a decrease by 30.1 thousand tons (14.5%) is reported and by the long rolled steel an increase by

28 117.5 thousand tons (18.9%), compared to the previous year Data for the last several years are shown in Table 2.4. Figure 2.4 Production of flat and long rolled metal, thousand tons Over the past two years the ratio long/flat rolled steel has changed in favor of the long products. In 2016 this ratio was 80.2%/19.8%, whereas in 2015 it was 74% / 26%, respectively. Figure 2.5 Production of flat and long rolled metal, 2016, % The increase of thousand tons by the long RFM is due to the growth of the production volumes in both producing companies: - Promet Steel JSC - 88 thousand tons more than in 2015; - "Stomana Industry" JSC - the increase is 29.5 thousand tons.

29 Figure 2.6 Production of rolled ferrous metals (RFM) by companies, thousand tons PRODUCTION OF ROLLED FERROUS METAL ARTICLES Articles of rolled ferrous metals in Bulgaria are produced from own raw materials - long rolled, as well as from imports from third countries - sheets, strips and wire rod. The companies BAMI-members have produced in 2016 RFM in quantities given in Table 2.2. Table 2.2 Production of RFM articles by companies and assortment, thousand tons 2016/15 Articles: Companies: /- 2016/15 % Steel pipes, welded PIH Industry JSC 44,5 0,0 48,8 48,0 50,8 2,8 105,8 "Stomana Industry" JSC 12,8 0,0 17,2 29,4 19,9-9,5 67,7 Steel balls for mills El Stomana LTD 0,0 0,0 0,0 29,6 18,2-11,4 61,5 Total 12,8 0,0 17,2 59,0 38,1-20,9 64,6 Wire and wire articles ZHITI JSC 12,6 0,0 13,2 12,0 13,1 1,1 109,2 Mine profiles "Stomana Industry" JSC 6,9 0,0 0,0 0,0 0 0,0 0,0 Total RFM articles 76,8 0,0 79,2 119,0 102,0-17,0 85,7 Source: Company data After 2009 only welded steel pipes are produced and of the BIMI members PIH Industries AD is a producer of these articles. Steel balls for mills are produced by two companies BAMI-members -"Stomana Industry" JSC and "El Stomana"LTD. JTITI JSC is the main producer of wire and wire articles in the country.

30 Figure 2.7 Production of RFM products, thousand tons 2.2. TRADE TURNOVER AND CONSUMPTION OF RF METALS AND PRODUCTS IMPORT OF SCRAP, RFM AND PRODUCTS The total quantity of rolled ferrous metals (RFM) and their articles, incl, scrap, imported in 2016 is thousand tons. Compared to 2015 there is an increase of thousand tons (12.3%). The import amounted BGN million, by BGN 186 million more than in the previous year. Table 2.3 shows the quantities of imports by goods groups and illustrates that this increase is due to two items - semi-finished products for the production of long rolled steel in Promet Steel JSC and import of welded pipes thousand tons of scrap (pig iron, iron and steel) were imported in Bulgaria in There is a slight drop compared to by 10.3 thousand tons. In recent years scrap imports have been declining, while between 2006 and 2010 the quantities were between 200 and 300 thousand tons each year. As in previous years almost all scrap is imported from Romania (70%) and Serbia (29%).

31 Import of scrap, RFM and products, thousand tons Table 2.3 Goods: /15 +/- 2016/15 % Non-alloyed - total 1201,2 1309,3 1233,5 1455,2 1545,2 90,0 106,2 Pig iron, ingots, granules, powder 15,1 20,6 15,7 19,7 15,2-4,5 77,2 Ferroalloys 21,1 14,3 16,5 13,8 11,4-2,4 82,6 Scrap 113,5 93,3 115,5 105,2 94,5-10,7 89,8 Semi-finished products 299,4 412,6 338,4 372,8 482,4 109,6 129,4 HR metal (coils and sheets) 359,9 383,4 361,9 492,2 511,0 18,8 103,8 CR metal (coils and sheets) 98,2 107,9 113,1 122,0 122,1 0,1 100,1 Rolled wire 113,4 128,0 114,3 118,2 120,5 2,3 101,9 Bars 113,0 90,0 97,3 141,0 113,9-27,1 80,8 Profiles 67,6 59,2 60,8 70,3 74,2 3,9 105,5 Alloyed total 60,8 68,9 75,5 72,2 83,9 11,7 116,2 HR and CR coils and sheets 35,3 38,5 43,0 39,8 43,5 3,7 109,3 Bars and profiles 25,5 30,4 32,5 32,4 40,4 8,0 124,7 RFM Products 215,9 288,5 664,2 322,7 447,7 125,0 138,7 Seamless pipes 33,0 49,6 30,1 28,2 33,8 5,6 119,9 Welded pipes 32,2 35,5 470,2 112,5 218,1 105,6 193,9 Coated sheets 120,9 129,7 133,4 154,1 168,3 14,2 109,2 Wires, ropes etc. 29,8 73,7 30,5 27,9 27,5-0,4 98,6 Total 1477,9 1666,7 1973,2 1850,1 2076,8 226,7 112,3 Value, EUR million 903,2 924,0 1340,8 985,1 1080,2 95,1 109,7 Value, BGN million 1766,6 1807,2 2622,4 1926,7 2112,7 186,0 109,7 Source: Customs statistics, NRA The import of pig iron over the last 5 years fluctuates between 15 and 20 thousand tons per year thousand tons were imported in % less than in Main suppliers are Ukraine, Russia and the Netherlands. The import of semi-finished products used as raw material for the production of rolled products in 2016 is thousand tons there is an increase of thousand tons compared to Over 90% of the semi-finished products are imported from Ukraine. The main consumer is Promet Steel JSC.

32 Figure 2.8 Import of scrap and semi products, thousand tons The import of flat RFM in 2016 is thousand tons an increase of 22.6 thousand tons compared to In 2016 RFM was imported mainly from Ukraine (73 %). The imported long RFM in 2016 is 349 thousand tons - a decrease by 12.9 thousand tons ( 12.9 % ) compared to Figure 2.9 Import of flat and long rolled metal, thousand tons The imported wire rod in 2016 is thousand tons, with a slight increase of 2.3 thousand tons compared to The main importers are as in previous

33 years Ukraine, Greece, Bosnia and Herzegovina and Turkey. It is to be mentioned that the share of Ukraine is decreasing - from 69.4% in 2015 to 46.2% in 2016, at the expense of increased imports from Greece (23.2%) and Bosnia and Herzegovina (15%). The import of bars from non-alloyed steels in 2016 was thousand tons, decreasing by 27.1 thousand tons. Importers of these products are Ukraine (40%) and Greece (33.5%). The import of non-alloyed steel profiles is increasing by 3.9 thousand tons compared to 2015 and was 74.2 thousand tons. The biggest quantities were imported from Turkey - 32%, Romania % and Luxembourg - 12%. The needs of alloyed long and flat products are covered entirely by imports; the quantities mark an yearly increase by ca. 10 %. In 2016 the imported alloyed rods and profiles increased by 8 thousand tons (25 %). Main importer is Russia (30 %), followed by China (26 %) and Ukraine (10 %). In total thousand tons products of RFM were imported in thousand tons more than in This significant increase and the growth in 2014 as well are due to the supply of welded pipes for energy projects. Main importers of pipes are UK (61.6%) and Germany (26%). Figure 2.10 Import of metal products, thousand tons The import of seamless pipes in 2016 is increasing slightly by 5.6 thousand tons and is mainly coming from Romania (22 %), Germany (17.8 %), Ukraine (19.2%) and Italy (13 %).

34 In 2016 the import of wire, ropes, cables and similar iron and steel products to Bulgaria is remaining on the level of 2015 totaling to 27.5 thousand tons. These products are imported mainly from Turkey, China and Russia. An increase has been recorded in the import of coated sheet thousand tons or by 14.2 thousand tons more than in After Kremikovtzi JSC has wound up local consumption is covered by import solely - ca. 35 % are imported from neighbouring Balkan countries Macedonia, Romania, Turkey and 15.7% from China. Figure % 7.5 % 37.7 % 48.7 % seamless pipes welded pipes caoted sheet wire, ropes etc. Import of metal products by articles, thousand tons The biggest share in the structure of metal products imports in 2015 is this of welded pipes %. Traditionally, due to the increased consumption and lack of production in the country, the coated sheet has a significant share, but compared to 2015 it drops from 47.7% to 37.7% EXPORT OF SCRAP, RFM AND PRODUCTS Data on the export of FM articles for the last five years incl and the changes to 2015 appear on Table 2.4. The total exported quantities of scrap, ferrous metals and articles in 2016 amount to thousand tons, compared to 2015 there is an increase by thousand tons or by 12.3%. The export of metal articles (excluding scrap) in 2016 totals thousand tons compared to thousand tons in 2015, or the increase is by thousand tons (7%). The trend of a continuous decrease in the export of ferrous metals and their products was halted in This is due to the growth in the production and

35 export of long products (from thousand tons in 2015 reached thousand tons in 2016), as well as to the increase (by 70.4 thousand tons) in the export of metal products In terms of value the export of scrap, RFM and products is amounting BGN million in 2016, by 46.2 BGN million (4.7 %) more than during the previous year. Table 2.4 Export of scrap, RFM and products, thousand tons Articles: /15 +/- 2016/15 % Non-alloyed - total 1577,1 1417,5 1224,4 937,5 1007,2 69,7 107,4 Pig iron-ingots, granules, powder 1,3 2,2 1,9 0,8 26,2 25,4 3275,0 Ferroalloys 2,6 3,9 4,3 2,4 1,3-1,1 54,2 Scrap 730,7 611,0 399,0 239, ,3 100,5 Semi- finished products 14,3 11,7 6,3 2,3 4,6 2,3 200,0 HR metal (coils & sheets) 307,0 246,6 291,1 240,5 208,6-31,9 86,7 CR metal (coils & sheets) 10,5 16,9 14,9 16,9 17 0,1 100,6 Rolled wire 47,5 49,8 39,3 27,5 15,7-11,8 57,1 Bars 416,6 431,0 423,3 371,7 457,5 85,8 123,1 Profiles 46,6 44,4 44,3 35,7 35,3-0,4 98,9 Alloyed - total 8,1 15,5 39,1 48,6 52,6 4,0 108,2 HR and CR coils and sheet 2,8 2,1 2,8 2,8 4,5 1,7 160,7 Bars and profiles 5,3 13,4 36,3 45,8 48,1 2,3 105,0 RFM products 115,5 118,8 132,9 182,2 252,6 70,4 138,6 Seamless pipes 2,6 2,7 2,8 1,8 2,5 0,7 138,9 Welded pipes 97,7 100,5 116,0 168,8 224,8 56,0 133,2 Coated sheets 9,0 7,6 7,5 6,2 11,4 5,2 183,9 Wires, ropes etc. 6,2 8,0 6,6 5,4 13,9 8,5 257,4 Total, thousand tons 1700,7 1551,8 1396,4 1168,3 1312,4 144,1 112,3 Value, EUR million 784,0 668,5 622,7 503,6 527,3 23,7 104,7 Value, BGN million 1533,4 1307,5 1217,9 985,0 1031,2 46,2 104,7 Source: Customs statistics, NRA The export of flat and long RFM is shown in Figure2.12. The drop by the flat RFM is 30 thousand tons (11.5 %) coming to thousand tons. The basic export destination of the flat rolled metal in 2016, as in the previous years, are the EU(28) member states 66.7% of the exported quantities. A smaller part of the export ca. 30% goes to neighbouring Balkan countries, non member states of the EU - Turkey, Macedonia, Serbia and Albania. The export of long RFM in 2016 totals thousand tons, by 75.8 thousand tons more than in 2015 (an increase by 15.8%).

36 Figure 2.12 Export of flat and long rolled metal, thousand tons The export of non-alloyed steel bars in 2016 was thousand tons and increased by 85.8 thousand tons compared to the previous year or by 23.1%. Non-alloy steel bars are mainly exported to neighboring Balkan countries - over 55% for Romania, and 13.3% for Macedonia, Serbia and Turkey. The export of non-alloyed steel profiles remain at the level of 2015 and about 65% of the products go to EU countries. Figure 2.13 Export of metal products, thousand tons

37 For more than 5 years the trend continues of increasing the export of metal products - mainly welded pipes (Fig. 2.13). In 2016 it reached thousand tons and shows a significant growth of 38.6% (70.4 thousand tones) compared to the previous year. The basic destination of the RFM products exports are the EU(28) countries ca. 90%. The welded pipes have the main share of the exports of RFM products - 89% in The remaining productions have a smaller share, both in total production and in exports. Figure 2.14 Export of metal products from RFM, thousand tons Figure 2.15 shows the import and export of flat rolled steel for the period the import is significantly higher than the export and in 2016 it is 3 times bigger. The difference in quantities is increasing due to the increase of imports (over 3%) and the drop of exports (11.5%). Figure 2.15 Import and export of flat rolled metal, thousand tons

38 In the case of long products (Fig. 2.16), as opposed to the flat ones, export is higher than import due to the domestic production capacities. In 2016, the export grew by 75.8 thousand tons and the import decreased by 12.9 thousand tons, respectively export is 1.5 times higher than import. Figure 2.16 Import and export of ling rolled metal, thousand tons Over the last 5 years both import and export of metal products is increasing and in 2016 their growth is more than 2 times compared to Figure 2.17 Import and export of metal products, thousand tons

39 In 2016 the import of basic types ferrous metals products are higher than exports and for this year the trade balance is negative. Total imports of all products exceeded exports by thousand tons. Foreign trade balance of ferrous metals products in 2016 Import, Production: Export, thousand tons Thousand tons Difference Semi-finished products 4,6 482,4-477,8 Flat HRM 230,2 676,6-446,4 Long HRM 556, ,5 Finished products 252,6 447,7-195,1 Scrap ,5 146,5 Total 1284,9 2050,2-765,3 Source: Customs statistics, NRA Table 2.5 The balance differs for different groups, as follows: - semi-finished products over the years the foreign trade balance is negative and Bulgaria is a net importer of semi-finished products for processing in metallurgical enterprises; - flat-rolled and RFM products in 2016 the import also exceeded the export, respectively by thousand tons and thousand tons, due to missing or limited in the assortment capacities; - long RFM and scrap - in 2016 the export is higher than the import, respectively by thousand tons. In 2016 the export of metallurgical production only, without scrap is thousand tons, and the import thousand tons, i.e. the foreign trade balance is negative. Compared to the previous year the negative balance is increasing due to a decrease in exports and a rise in imports -from 586 thousand tons in 2015 it reaches thousand tons in FOREIGN TRADE TURNOVER OF ROLLED FERROUS METALS AND FINISHED PRODUCTS Data on the foreign trade turnover of FRM (excluding pig iron, ferroalloys and scrap) in terms of nature for the last five years are given in Table 2.6. The total turnover of RFM in 2016 is thousand tons - by thousand tons higher than in This increase is due both to the growth in imports - by thousand tons and to the increase in exports - by 48.1 thousand tons. However, the overtaking import growth rate in 2016 worsens even more the negative RFM trade balance reaching thousand tons. This is the highest

40 value for the indicated period, showing a trend for increasing imports, despite a certain increase in exports of Bulgarian companies. The turnover of RFM products in 2016 makes thousand tons. In recent years there was an increase both in the import and the export of RFM products but the trade balance remains negative the import exceeds the export by thousand tons. Table 2.6 Foreign trade turnover of RFM and finished products, thousand tons 2016/15 +/- 2016/15 % Products of RFM and articles Rolled ferrous metals - import (incl semis) 1112,3 1250,0 1161,3 1388, ,3 108,6 - export (incl semis) 850,5 815,9 858,3 743,2 791,3 48,1 106,5 Total turnover 1962,8 2065,9 2019,6 2131,9 2299,3 167,4 107,9 Balance (export-import) -261,8-434,1-303,0-645,5-716,7-71,2 111,0 RFM products - import 215,9 288,5 664,2 322,7 447,7 125,0 138,7 - export 115,5 118,8 132,9 182,2 252,6 70,4 138,6 Total turnover 331,4 407,3 797,1 504,9 700,3 195,4 138,7 Balance (export-import) -100,4-169,7-531,3-140,5-195,1-54,6 Source: Customs statistics, NRA DOMESTIC SALES OF RFM AND FINISHED PRODUCTS In 2016 the total sales of RFM and finished products are thousand tons. The realization is increasing by thousand tons (9.4 %) compared to 2015 due to the increased export by118.5 thousand tons (12.1%). The domestic sales are decreasing slightly by 5.4 thousand tons (2 %). Figure 2.18 Realization of RFM products,

41 The total realization growth of the flat and the long RM increased by 6.8% in 2016 as compared to The growth of exports grew by 48.1 thousand tons in 2016, as compared to 2015 and the domestic market - by 16.9 thousand tons. More significant is the increase in the long rolled FM - the export grew by 75.8 thousand tons and the local market - by 15.8 thousand tons. The total realization of the RFM products is also growing by 48.1 thousand tons only due to the increased export - by 70.4 thousand tons. The quantities for the domestic market are decreasing by 22.3 thousand tons. Table 2.7 Realization of ferrous metals production Production Export Domestic market Total realization Semi-finished products 2,3 4,6 0,0 0,0 2,3 4,6 Long RFM 480,7 556,5 184,3 200,1 665,0 756,6 Flat RFM 260,2 230,2 21,9 23,0 282,1 253,2 Total RFM 743,2 791,3 206,2 223,1 949,4 1014,4 Articles 182,2 252,6 68,0 45,7 250,2 298,3 Total 925,4 1043,9 274,2 268,8 1199,6 1312,7 Source: Company data, Customs statistics and NRA The production of the ferrous metallurgy in Bulgaria is traditionally exportoriented. In 2016 the ratio export/domestic market was 79.5%/20.5%. This ratio emphasis once again that ferrous metallurgy in Bulgaria is export-oriented. Figure 2.19 Realization of RFM products, 2016

42 REAL HOME CONSUMPTION OF STEEL PRODUCTS The Real home consumption (RHC) of RFM and products is formed by the sum of the realization on the domestic market and the import. Data on RHC in 2015 and 2016 are presented in Table 2.8. In 2016 RHC of steel products is growing by thousand tons compared to the previous year and amounts thousand tons. The RHC of flat and long products has a real growth of 26.6 thousand tons. The consumption of long products is increasing slightly, the RHC growth of flat products is 23.7 thousand tons. The RHC growth total for the long and flat RFM is mainly due to the increased domestic realization - by 16.9 thousand tons. A significant growth is to be seen in the RHC of metal products by thousand tons (26.3 %) due to the almost doubled import of welded pipes (105.6 thousand tons) and the increased delivery of coated sheets. Table 2.8 Real home consumption (RHC) of steel products, thousand tons Products: /2015 Home sales Import Total Home sales Import Total Difference % Long RFM 184,3 361,9 546,2 200, ,1 2,9 100,5 Flat RFM 21,9 654,0 675,9 23,0 676,6 699,6 23,7 103,5 Total RFM 206,2 1015,9 1222,1 223,1 1025,6 1248,7 26,6 102,2 Products of RFM 68,0 322,7 390,7 45,7 447,7 493,4 102,7 126,3 Total 274,2 1338,6 1612,8 268,8 1473,3 1742,1 129,3 108,0 Source: Customs data and NRA (Import) Company data (Domestic realization) Figure 2.20 Real home consumption,

43 The consumption of steel products is also expressed by the so-called apparent consumption (AC) calculated by the formula: AC = (M + I) E, where AC apparent consumption (in thousand tons) M manufactured steel products (in thousand tons) I imported steel products (in thousand tons) E exported steel products (in thousand tons) (excluding pig iron, ferroalloys and scrap) In 2016 the apparent consumption (AC) of steel products in Bulgaria is thousand tons, compared to 2015 the AC is growing by 88.2 thousand tons. The situation by the different product groups is as follows: - long RFM - the AC is growing by 28.8 thousand tons; - flat RFM the AC is growing too by 21.8 thousand tons - products of RFM the AC is growing by 37.6 thousand tons. Table 2.9 Apparent consumption of steel products, thousand tons Year Production Import Export AC APCC ,2 1745,7 1748,0 2108,9 301, ,1 1341,8 1210,7 2072,2 296, ,3 700,2 941,2 840,3 120, ,5 734,6 854,4 844,7 112, ,4 1040,6 1164,9 1070,1 145, ,1 1028,8 951,8 972,1 133, ,1 1125,9 923,0 1148,0 157, ,2 1487,1 984,9 1518,4 210, ,5 1338,6 923,1 1369,0 191,4 2016,incl. 1023,2 1473,3 1039,3 1457,2 205,2 - long RFM 739, ,5 531,6 74,9 - flat RFM 182,1 676,6 230,2 628,5 88,5 - finished products ,7 252,6 297,1 41,8 Source: Company data (production), Customs data (import and export) The apparent per capita consumption (APCC) is another interesting indicator. In 2016 the APCC of steel product is kg, compared to 2015 it is increasing by 13.8 kg (7.2 %). The APCC in Bulgaria for the 2016 is 65.9 % from the average for the EU (28) it was 63 % for The countries with the highest APCC in the world in 2016 are: - Republic of Korea kg/capita - Taiwan/China kg/capita - Check Republic kg/capita - Germany kg/capita - China kg/capita

44 - Japan kg/capita - Austria kg/capita In Bulgaria in 2016 the AC and the RHC of steel products are growing (Figure 2.21) respectively by 7.2 % and 10 %. In 2015 the difference between the two figures was thousand tons and in 2016 it is thousand tons, influenced by various factors, such as stocks (with producers or importers), reexports etc. Figure 2.21 Real consumption and apparent consumption of steel products, thousand tons There is a trend within the EU(28) for increasing both of the real and of the apparent consumption of steel products. The apparent consumption for 2016 total for the union is thousand tons (an increase of thousand tons compared to 2015).The real consumption for 2016 marks thousand tons by thousand tons more compared to the previous year PRODUCTION AND CONSUMPTION OF REFRACTORY ARTICLES AND MATERIALS The production of refractories and refractory materials is an activity directly related to the metallurgical industry. The main suppliers of refractory materials for lagging and coating the furnaces and aggregates for casting, storing and spilling of the liquid metal are the companies "Shamot JSC and "Refran" Ltd.,

45 both are BAMI-members. Data on the refractories and refractory materials produced by them are given in the figure below. Figure 2.22 Production of refractory materials, tons The total quantity of refractory materials produced in 2016 by both enterprises reports a drop by 815 tons (23.5%). The output of "Shamot JSC remains close to the level of the previous year, while in Refran Ltd. there was a decrease by tons (40%). The enterprise is restructured, diversifies its activities in other areas by using EU funding to implement the following projects: - Program for appropriate and safe working conditions Operational program Human resources development - Development of the Managing Capacity and Growth of SMEs - Operational program "Innovation and Competitiveness". The total value of both projects comes to 350 thousand BGN, the implementation period is The refractory materials produced by companies of BAMI-members are mainly directed to consumers within the country, the production is realized on the domestic market.

46 2.4. METAL CASTING According to the national classification of economic activities (NCEA 25.5) casting of ferrous and non-ferrous metals and their alloys belongs to the general sector 24.Production of basic metals. Capacities for metal castings are operating in the country producing for the domestic market and for export. They are producing parts for equipment, connecting elements etc. providing spare parts in the form of castings or machined parts for different sectors of the economy and for households. Metallurgy and metal casting have common characteristics regarding the technologies, processes and equipment used, and determine common problems, tasks and objectives of the enterprises and so bringing their activities into one unified code of the standard classification. The Bulgarian Association of the Metallurgical Industry is including the indices of the metal casting into the sector key indicators, in accordance with the European and world practice. BAMI-members reporting under classification of economic activities Metal casting are: Berg Montana Fittingi PJSC, BMB Metal Ltd, Casting, Forging Mashinery Complex Ltd., Chugunoleene - Parvomay AD and GES Trading Ltd. Berg Montana Fittingi PJSC is specialized in the production of fittings for export in EU member states. The company is developing successfully, ensuring high quality of its production, investing in new machinery and equipment, in better working conditions and environmental protection. IPO Ltd. - in the town of Karlovo is producing single, small and middlesized series of ferrous and non-ferrous metal parts with primary treatment or complete machining. Good quality is the basis for achieving high growth in the production which is mainly for the Bulgarian market. The company is performing repair activities in companies from the basic industries incl. metallurgy. BMB Metal Ltd. is organizing and managing the production of castings coming from the pig iron cast factory in the town of Ihtiman and the Cast and forge machine-building complex in Radomir. The companies are restructuring their production and updating the technologies and equipment. In 2016 there is a positive turn to recover the casting production in Radomir. 72 % of the production is realized on the domestic market and 28 % was for export to third countries. In 2016 the company produced 594 tons ferrous metals casts; investments were made amounting 2.4 million BGN.

47 According to NSI data, the production activity 24.5.Metal casting-indicators mark the following values and a relative share of the total CEA 24. Production of basic metals: 24.Basic metals 24.5.Casting % Output produced, million BGN Employees, number Employer's labor costs for 1 working hour by employees, BGN The share of the employed in the casting capacities of the total number of employees under activity 24. Production of basic metals is 31%, the output produced by them has a relative share of 2.6%. Employers' labor costs per employee per hour are also lower than those in basic metallurgy (61%). These indicators are influenced by factors such as the still low exploitation of the casting capacities, the unfinished reconstruction of organization, technology and equipment aiming improvement of productivity and quality. The total production in 2015 of the EU(28) under CEA activity 24.5 Casting of metals is worth 37.6 milliard EUR. This makes 11.4% of the total production under CEA 24.Production of basic metals. For Bulgaria this indicator is 2.6%, more than four times lower.

48 SECTION THREE NON-FERROUS METALLURGY IN BULGARIA 3.1. PRODUCTION OF NON-FERROUS METALS In 2016 the non-ferrous metallurgy is characterized by a well developed and competitive stable production. The significant production capacities and the limited domestic consumption continue to identify the sector as export-oriented, with good market positions in world trade PRODUCTION OF ANODIC AND ELECTROLYTIC COPPER Anodic and electrolytic copper in Bulgaria is produced only by Aurubis Bulgaria JSC. The company is member of Aurubis AG - a leading integrated world group in the copper industry (over 1.1 million tons of copper cathodes/year and a variety of copper products), and ranking as the world leader in processing of copper. The copper production plant of Aurubis Bulgaria JSC is placed in the Srednogorie region. It was build in 1958 and consists actually of four production units: metallurgy, cathode copper refinery, production of sulphuric acid and enrichment factory. After the privatization of the company in 1997 large investments over BGN 1 billion for the modernization and the environment protection were made. In 2016 under the planned Aurubis Bulgaria Spectrum 2018 investment, worth EUR 180 million, the Repair 2016 project was completed, too. It will secure the normal functioning of the basic equipment during the next ten years. During the overhaul eleven aggregates were completely changed (melting furnace, utilization tank, etc.). This investment is worth EUR 45 million. In 2016 ended the project to buy and install a turbo generator for an active vapor pressure reduction after the utilization tank 49 bar to 4 bar; completed is the construction of a new deposit station for the sediments from the treated wastewater and gases according to all legal ecologic norms. In 2016 the building of a waste-water station for fayalite was started. Data about the treated concentrates and scrap included into the production of anodic and electrolytic copper for a period of five consecutive years ( ) are shown on table 3.1 and fig 3.1.

49 Table 3.1 Processed unwrought materials in the production of anodic and electrolytic copper Difference /2015 +/- % Concentrates, tons copper contents,% metal contents, tons Incl. in imported in local Scrap (purchased), tons Source: Company data tons of copper concentrate have been processed in 2016 by 12.3% less than in 2015; they contain t copper. The ratio between the included imported and local concentrates in 2016 is shown in Figure 3.1. The share of the local concentrates is growing by 3.7%. Figure 3.1 Processed concentrates, tons of metal The quantities of processed copper are 17.2% from copper in the raw materials and its share in the common shift is going down in the last three years. The quantities of anodic and electrolytic copper produced during the period are shown on Table 3.2 and Fig. 3.2.

50 Production of anodic and electrolytic copper, tons Product Table 3.2 Difference 2016/2015 +/- % Anodic copper Electrolytic copper Source: Company data Due to a the large-scale renovation of the main metallurgical facilities in the factory in 2016, smaller quantities of copper concentrates and copper scrap were processed. As a result, reported is a decline in the production of anodic copper by 14.8% and the electrolytic copper by 5.8%. Using the sulfur contained in the concentrates, tons of sulfuric acid were produced - by 12% less than in 2015, due to the smaller quantities of processed copper concentrates. Figure 3.2 Production of anodic and electrolytic copper, tons In 2016 the world production of refined copper increased by 1.9% to 23.3 million tons. The world production of electrolytic copper by regions is presented in Table 3.3 and Fig.3.3.

51 Table 3.3 World production of electrolytic copper, thousand tons Region Difference 2016/2015 +/- % Asia America Europe Africa Other Total Source: ICSG Data show that Asia continues to hold the biggest share in the world production (54.4%), with a 20.6% higher growth rate (5.6%) compared to 2015 (3.0%, respectively), followed by America with a share of 22.3% and a decrease of 0.5%. Europe ranks third with a share of 16.0%, also reporting a 1% decline. Figure % 2.1% 16% 22.3% 54.4% Asia America Europe Africa Other World production of electrolytic copper (by regions), 2016, % The relative share of electrolytic copper produced in Bulgaria in 2016 is 0.93% of the world production and 8.01% of the EU(28) production. For 2015, the numbers are 1.01% and 8.49%, respectively. Regarding the anodic copper, the Bulgarian production has a share of 1.56% of world production and 13.2% of

52 EU production, which shows that the Bulgarian copper industry has good positions in world production LEAD PRODUCTION In Bulgaria, metallurgical capacities for the production of lead ingots and lead alloys have been built, both on the basis of primary raw materials (concentrates) and lead-containing wastes. KCM JSC is the only enterprise in the country and a leading company in Southeastern Europe and the Black Sea region with a specialization in the production of lead and zinc mainly from primary raw materials. The company is part of KCM JSC, one of the biggest industrial groups in Bulgaria and a key participant in the economic life of the country. In 2016 the enterprise continued to realize an investment project "Technological renewal and expansion of production" coming to a total value of more than BGN 260 million. Only in the past year the invested funds are BGN thousand. The accents in the investment activity in 2016 are: - Reconstruction of a warehouse for lead raw materials; - Modification of Installation for washing and extraction of powders from the steel industry ; - New drying tower in TU Frying and sulfuric acid ; - Activated cleanser of cobalt and nickel. Data on processed primary and secondary raw materials for lead production are shown in Table 3.4. and Fig Table 3.4 Processed raw materials in the production of lead, tons Product Difference 2016/2015 +/- % Metal in concentrates Incl.: in imported in local Processed waste (imported) Source: Company data In 2016 lead concentrates were processed which contained tons of lead. Lead in local concentrates grew by 19.6% and their relative share in the total volume already exceeds 32% (26.6% in 2015).

53 Figure 3.4 Processed concentrates, tons of metal In the production of primary lead tons of lead waste were used, which represents 15.5% of the total raw material balance (25% in 2015). Lead produced from secondary raw materials, mainly from battery s waste, has an increasing share of the total quantity. In the country there are capacities for efficient processing of these raw materials to block metal, alloys or other end products ( KCM JSC, Monbat Recycling PJSC and El Bat JSC). Data on the production of primary and secondary lead, including battery alloys in the period 2012 to 2016, are presented in Table 3.5 and Fig Table 3.5 Lead production, tons of metal Product Difference 2016/2015 +/- % Lead - primary KCM JSC Lead - secondary Monbat Recycling PJSC El Bat JSC Lead - total Source: Company data. The produced lead (primary and secondary) is growing steadily over the last five years and in 2016 it exceeds 100 thousand tons with a growth of 4.1%.

54 The increased production is entirely due to the processing of larger amounts of battery s waste, the largest contribution to this has El Bat JSC (over 4500 tons). From the processing of secondary lead raw materials (incl. batteries), the three plants produced over 40 thousand tons of lead and lead alloys, which represents more than 40% of the total production in the country. Figure 3.5 Lead production total, tons The world lead production by regions and the largest producer countries for the past three years are presented in Table 3.6 and Figure 3.6. Table 3.6 World lead production, in thousand tons Country/Region Difference 2016/2015 +/- % Asia inc. China incl. Republic of Korea America incl. USA EU (28) incl. Germany Other Total Source: ILZSG

55 Asia has the biggest relative share of the world production (61.3%), which presents a growth by 3.1%. This is due to the increased production in the Republic of Korea, while in China, the world's largest producer of lead, the production is almost at the level of America is following with a share of 18.6% and a growth by 3.2%. The EU (28) ranks third with a share of 15.7%. Within the EU(28) traditionally Germany has the biggest relative share of production %, but in 2016 the production in the country decreased by 8.2%. UK ranks second with 18.2% and Italy has a share of 12.5%. Figure % 15.7% 18.6% 61.3% Asia America EU 28 Other World lead production (regions), 2016, in % The total quantity of lead produced from primary and secondary raw materials in 2016 in Bulgaria represents 0.905% of the world production and 5.75% of the EU(28) production. For 2015 these figures were 0.91% and 5.52% respectively. By volume of the total lead Bulgaria ranks eighth from the EU producer countries ZINC PRODUCTION KCM JSC in Plovdiv is the only enterprise for processing of zinc concentrates and various zinc containing semi-products and secondary raw materials to zinc ingots and zinc alloys. As byproducts of this processing a number of other rare and precious metals and chemical products (sulfuric acid, cadmium, tellurium, bisulfate etc.) are obtained.

56 The data about processed metal contained in local and imported concentrates and the input of secondary raw materials/scrap in the production of zinc are shown in Table 3.7 and Figure 3.7. Table 3.7 Processed raw materials for the production of zinc, in tons Difference Product /2015 +/- % Metal in concentrates, incl.: import local Processed imported scrap Source: Company data Concentrates containing tons of zinc were processed in by tons (7.4%) less of the previous year. Zinc in local concentrates grew by 5.7% and its relative share in the total amount of used concentrates exceeded by 18% (15.8% in 2015). Figure 3.7 Processed concentrates, in tons of metal Compared to the previous year the utilized quantities of byproducts and wastes from external sources were significantly higher - by tons more and their share in the total batch increased from 15% in 2015 to 21.1% in Zinc production data over the last five years are shown in Table 3.8 and Fig. 3.8.

57 Table 3.8 Zinc production, in tons Product Difference 2016/2015 +/- % Zinc - total Source: Company data tons zinc were produced in tons more compared to the previous year, mainly due to the increased waste quantities. Figure 3.8 Zinc production in 2016, in tons Table 3.9 and Figure 3.9 show the world zinc production by regions and the biggest producer counties, their relative share and the increase/decrease compared to the previous year. Table 3.9 World zinc production, in thousand tons Country/Region Difference 2016/2015 +/- % Asia incl. China EU (28) incl. Spain America incl. Canada Other Total Source: ILZSG

58 In 2016 zinc production in the world remains at the 2015 level. Asia has the biggest relative share of the world production (65.5%) and a growth of 2.3%. Its production directly depends on the production of China - the world's leading zinc producer, with a share of 45.9 %. In 2016 China reported a 7.1% growth. The EU(28) ranks second with a share of 14.7%, but with a decline by 3.8%. Spain (25.4%), Finland (14.7%) and the Netherlands with 14.2% have the biggest share of the EU production. America is following with a share of 12.3% of the world production, but with a decline by 5.5%, resulting mainly from the reduced mining in the USA and in Mexico. Figure 3.9 6% 12 % 15% 67% Asia EU 28 America Other World zinc production (by regions), in 2016., in % The relative share of zinc produced in Bulgaria represents 0.55% of the world production and 3.8% of the total EU(28) production. In the EU ranking of zinc producing countries, Bulgaria is on the 9 th position (11 th in 2015) PRODUCTION OF PRECIOUS BY PRODUCT METALS, ALLOYS AND CHEMICAL PRODUCTS The output of precious metals, byproducts and chemical products is determined by the content and quantities of processed primary raw materials (concentrates). An important part of the technologic processes in the production of the basic non - ferrous metals (copper, zinc and lead) is the recovery of the useful metallic and nonmetallic components concentrated in the waste technologic gase or in the solid byproducts. Their treatment generates byproduct metals or various

59 commercial chemical products that raise the effectiveness of the basic production and at the same time helps to protect the environment. Data about the production of precious and byproduct metals, alloys and chemical products are presented on table Table 3.10 Production of secondary, precious and byproduct metals, alloys and chemical products (tons, kg) Product Difference 2016/2015 +/- % Cadmium ingots, t Silver, kg Silver products, kg Gold, kg Gold products, kg Tellurium, kg Sodium sulfate, t Sulfuric acid, t Source: Company data. The table reveals that in 2016 the quantities of silver, gold and the accompanying metals (cadmium and tellurium) are going up due to the content of these metals in the processed primary and secondary raw materials in KCM JSC. Sulfuric acid has the biggest share of the production of all byproducts obtained within the metallurgical processing of copper, zinc and lead primary materials. The quantities produced in 2016 are by 9.8% less than in the previous year PRODUCTION OF ROLLED/PRESSED NON-FERROUS METALS AND ALLOYS The metal processing industry in Bulgaria is very well developed. From copper, zinc, lead, aluminium and their alloys different articles with a higher value added (sheet, strips, foil, pipes, profiles etc.) are produced. Data on the production data for the period are presented in Table 3.11 and Fig and Fig

60 Table 3.11 Production of R/P non-ferrous metals and alloys, tons Difference /2015 Product % +/- % R/P NFM and alloys incl. copper brass zinc R/P aluminium - Total Incl : Alkomet JSC ETEM Bulgaria JSC PIH Industry JSC Total: Source: Company data In 2016 the total quantity of R/P non-ferrous metals is growing by 3.7% mainly due to the increased production of aluminum R/P. Its relative share of the total is continuously increasing over the last three years and is reaching now 60.4%. The main domestic producer of HNFM articles and their alloys is Sofia Med JSC. The company is a part of the industrial group Halcor Greece incorporating companies of the Viohalco holding, producing rolled and pressed articles of copper, copper alloys and copper cables. Sofia Med JSC is producing a wide range of rolled and pressed articles (sheet, strips, circles, discs, rods, bars, profiles etc.) used in the construction, machine-building, electrical engineering and other sectors of the processing industry. Figure 3.10 shows the produced quantities of rolled and pressed HNFM from 2012 to 2016 by types.

61 Figure 3.10 Production of R/P HNFM, tons Table 3.11 and Fig illustrate that in 2016 the total production of R/P copper increases by 12.9% - the rolled increases by 23.6% and the pressed by 1.5%. The products of brass and zinc are only rolled. The rise by the rolled brass is 31%. During the year no zinc rolled was produced. The ratio between copper and brass R/P produced in 2016 is 80.8%/19.2%. Rolled products are 64.8% of the total HNFM production. In Sofia Med AD tons of imported scrap was processed - by 43.4% less than in In "Sofia Med" JSC an investment projects worth BGN 7.8 million was realized in In order to expand the assortment a line for continuous vertical casting of oxygen-free copper wire has been put in operation. The new capacity will increase the production efficiency and improve the product quality. The main producers of aluminum R/P are Alcomet JSC - Shumen, Etem Bulgaria JSC - Sofia and PIH Industry JSC - Rousse. Figures illustrating the production of aluminum R/P by enterprises are presented in Table 3.11, and Fig shows the total production.

62 Figure 3.11 Production of alluminuim R/P, tons Alcomet JSC is the biggest company specialized in the production of pressed (pipes, rods and profiles) and rolled (strips, sheet and foil) aluminium and aluminium alloys. The company has stable positions in the production of alluminuim foil and is keeping ¼ of the EU market. In 2016 the company produced tons R/P metal - an increase by 1.2% compared to Alcomet's products take a share of ca. 75% of the total amount of aluminum R/P in the country. The ratio between rolled and pressed is 68%/32% (in 2015 respectively 65.7%/34.3%), the increase by the rolled products is due to the modernization and the increased capacity of the rolled production. For the modernization of the production capacities and implementation of new technological solutions in Alcomet JSC investments were made for BGN 9.9 million. In 2016 the company announced its new investment program for the period worth ca. EUR 40 million. It will cover the three production plants - casting, roller and press. It foresees the annual capacity of Alcomet to reach tons, the efficiency of production to be increased and the technical and technological parameters of the processes to be improved. By purchasing of new equipment the quality will be improved and the manufacturing mix will be expanded, including products for the automotive, pharmaceutical and packaging industries. In the past year tons of aluminum waste was processed in the plant (by 9.2% less than in 2015).

63 "Etem Bulgaria" JSC is producing long (pressed) products - different types of aluminum profiles and architectural constructions, mainly door and window frames and facade elements for buildings. For several years the company has added to its portfolio also automotive products, which already are ca. 30% of the production. As a result, the total production of the company for the last five years is increasing by 60%. In 2016 the share of "ETEM Bulgaria" JSC is 24% of the total amount of aluminum R/P (respectively 20.8% in 2015). Compared to the previous year the production is increased by tons (22.1%). The constant and sustainable development of the company is due to the annual investments made for the modernization and expansion of production capacities, which resulted in a growth of the capacity and of the assortment. Projects amounting to BGN 7 million were realized during the past PIH Industry JSC is the only company in the country producing welded aluminum pipes tonnes were produced in 2016 by 22% more than in the previous year UTILIZATION OF NON-FERROUS METAL WASTE Waste of non-ferrous metals present an important raw material for the metallurgic production. Their processing to final articles leads to a considerable improvement of the economic and the environmental protection indices of the companies and to reduction of energy consumption. Data on the processed waste from non-ferrous metals (metal content) for the period by the companies members of BAMI are presented in Table Table 3.12 Processed non-ferrous metal waste, tons Waste Total Difference /2015 +/- % Copper Lead Zinc Aluminium Total metals Source: Company data

64 The table illustrates that the total quantity of processed waste in 2016 decreased by 9.4%. Copper and lead waste are respectively by tons and by tons less than in Aluminum waste used for recovery also drops but by only 464 tons. Only the zinc waste shows a significant increase by 40.2% TRADE EXCHANGE AND CONSUMPTION OF NON- FERROUS METALS The raw materials of non-ferrous metals over the entire added value chain are subject of the stock exchange and are traded at prices of the international markets, generally of the London metal exchange (LME). Changes of rules between different countries and regions such as imposing of taxes, embargos or quotas have also their impact on the metal prices and change the relation between demand and supply. The Figures below show the dynamics of the prices of the basic metal ingots, which Bulgaria has produced in the period January December 2016, taken from the official publications of LME. The Figures illustrate the big fluctuations in prices for this one-year period. Figure 3.12 Prices of el. copper (USD per ton) Fig.3.12 shows the price dynamic of the electrolytic copper. The graph shows that from the beginning of the year till the 4 th quarter of 2016 prices are running at lower levels - between and 5000 USD/ton. Only at the end of the year an increase coming up to 30% over the previous period is seen.

65 The price changes of metal lead are shown in Fig The graph shows that lead prices are also at relatively low levels from the beginning of A smooth rise started in August. The difference between the maximum and minimum monthly average price of lead for the specified period is about 600 USD/ton which is a change of 35%. Figure 3.13 Prices of lead (USD per ton) Figure 3.14 Prices of zinc (USD per ton) The prices of zinc ingot are shown on Fig After the drop in the end of 2015 down to USD/ton electrolytic zinc, from the beginning of 2016 prices are increasing smoothly. For the one-year period the difference between max and min price per ton is over USD, which is a change of more than 50%. It follows from the above, that in 2016 the price dynamic of industrial non-ferrous metals is significant. It is influenced by the political and economic situation all over the world. In this dynamic and competitive environment Bulgarian copper, zinc and lead production companies have good market positions. Lower metal prices have led to a decrease in the value of production and in the relative share of non-ferrous metals in the country's export.

66 IMPORT OF NON-FERROUS METALS AND FINISHED PRODUCTS The quantites of imported non-ferrous metals, alloys and finished products during the last five years are shown in Table Table 3.13 Import of non-ferrous metals and finished products, tons Difference Items /2015 +/- % Copper, total, incl Anodes Catodes, alloys, blanks Scrap Bars and profiles Wire Sheet and foil Pipes Lead, total, inc Ingot and alloys Scrap (pure) R/P metal Zinc, total, incl Ingot and alloys Scrap R/P metal Aluminium, total, incl Ingot and alloys Scrap Bars and profiles Wire Sheets and strips Foil Pipes Total, tons Value, EUR million Value, BGN million Source: Customs statistics, NRA

67 The metals and metallurgical products included in the Table actually form the import realised in the sector and reflect real quantities and values by basic groups. The data show that in 2016 imported are tons of non-ferrous metals and their products worth BGN million. Compared to 2015 the volume of imports grew by 8.4% measured by natural indicators but in value it decreased by BGN million. The structure of the import of non-ferrous metals and their products by items is presented on Fig Figure % 32% 12% Copper Lead Zinc Alluminium 1% Structure of the import of NF metals and products (ingots, R/P metal and scrap) by items The import of aluminium ingots (not produced in the country) takes up more than 73% ot the total quantity in the group of aluminium and aluminium products and over 40% of the total import of non-ferrous metals and producs into the country. It is used as a basic raw material for the production of aluminium products and articles. In 2016 the import of unprocessed aluminium increases by 6.5 %. About 35% of the aluminium ingots are imported from EU countries, 30 % come from Russia and Turkey, and 19% from Mozambique. The import of aluminium products is growing by 4.9% - they are imported from the EU (65.3%), 24% are from Turkey and 10.7% - from other countries. The biggest share in the group copper and copper products takes the import of copper waste, coming up to 53.2%. Copper waste is used as an efficient and

68 environmental friendly raw material for the production of electrolytic copper and copper end products. They hold a share of 17% from the total non-ferrous metal imports in the country (22% in 2015). Ca. 60% of the waste is imported from the Balkan countries. Refined copper and copper alloys are mainly imported from Russia (40.6%), 46% from Balkan countries (Serbia, Turkey and Macedonia) and only 7.9% from EU member states. Deliveries in 2016 grew by 67.9%. 40.4% of the copper products are imported from the EU and 59.6% from other countries - their import grew by 66.3%. In the group lead and lead products the import of metallic lead waste (scrap) is 50.3% of the total quantity in this group and over 6% of total import of nonferrous metals and their products. It is used as a raw material for the production of lead and lead alloys. 73% of the supplies are from Romania. Compared to 2015 the import of lead waste grew by 8.1%. The import of unprocessed lead (ingots) incl. lead alloys is almost doubled in The biggest quantities were imported from Republic of Korea (58.3%) and Russia (17.2%), only 17.6% came from EU. The import of unprocessed zinc is constantly decreasing over the last three years. As compared to 2015 it is reduced by 39.1 %. The domestic consumption is fed mainly by the local production ca. 70%. The import originates quite exclusively from EU member-countries (97.9%) EXPORT OF NON-FERROUS METALS AND FINISHED PRODUCTS Data on the export of non-ferrous metals, finished products and metal waste (scrap) by types for the period are presented in Table The total export in 2016 amounts to tons, worth BGN million. Compared to 2015 the total quantity shows a decrease by tons ( 9.8%). As a result of the lower prices and of the reduced quantities exported metal and products, the drop in export value is significant 22%. The structure of the export shows that Bulgaria, besides being a producer and netto exporter of metal ingots (copper, zinc and lead) exports also considerable quantities of products (profiles, sheet, strips, foil etc.) with a high value added. Because of the small needs of the country and the modern processing capacities a large part of these products is primarily export-oriented. In 2016 the export of electrolytic copper is reduced by 11.5%. Ca. 39% of the quantities sold are directed to the EU countries and 39% go to China and Turkey. The sales of P/R copper (sheet, strips, rods etc.) are directed mainly to the EU countries (82 %). As compared to 2015 the export of copper products goes down by 10.3 %. In 2016 the export of lead is decreasing by 4.1 % % of lead ingolts are exported to EU member countries and the remaining quantities - mainly to neighbor countries (Turkey, Serbia, Mazedonia).

69 Export of non-ferrous metals, products and scrap, tons Items Table 3.14 Difference 2016/2015 +/- % Copper, total, incl Anodic copper Electrolytic copper Scrap Bars and profiles Wire Sheet, strips and foil Pipes Lead, total, incl Ingots R/P metal Scrap (pure) Zinc, total, incl Ingots R/P metal Scrap Aluminium, total, incl Ingot Scrap Bars and profiles Wire Strips and sheet Foil Pipes Total Value, EUR million Value, BG million Source: Customs statistics, NRA The export of unprocessed zinc (ingots) increased in 2016 by 16.3 % because the domestic consumption is constantly decreasing. The main market are the EU countries % and the rest goes to Balkan neighbor countries (Turkey, Serbia and Mazedonia). 75 % of the export in the group of aluminium is taken by R/P aluminium. In 2016 the export grows by 4.2 %. The most significant increase (by 12.3%) is recorded by foil. More than 95% of the R/P aluminium is destined to the EU countries.

70 Aluminium and aluminium alloys produced from secondary raw materials take 3.9 % of the total quantity of exported aluminium. In 2016 the export of these products is decreasing by 37.5%. The biggest share in the export of secondary raw materials keep aluminum waste and copper scrap. In comparison to 2015 the exported quantities of aluminium waste increased by 8.1%, the export of copper scrap remains at the same level. The main part of the aluminum waste (over 77%) has been exported to the EU countries. The biggest importers of copper scrap from Bulgaria are China 30.5%, followed by Turkey 20% and the EU countries the rest. Tables 3.13 and 3.14 allow the following conclusions to be drawn about the trade exchange in 2016: The export of non-ferrous metals and products of them still exceedes their import over 2 times, despite the fact that in 2016 the imported quantities grew by 8.4% and the export decreased by 9.8%. In terms of value the export decreased by BGN million (22 %) due to the lower prices of metals and to lower quantities of some traditional products from the country export list; Although the volume of imported non-ferrous metals and metal is increased, in value terms it decreased by 6.6%. It follows from the foregoing that the Bulgarian non-ferrous metallurgy, both in terms of quantity and value, keeps a positive trade balance independently from the changes in production and prices FOREIGN TRADE TURNOVER OF NON-FERROUS METALS Generalized data on the import and export in the non-ferrous metallurgy are shown in Table 3.15 and Table 3.16.

71 Table 3.15 Foreign trade turnover of non-ferrous metals, tons Indices Difference 2016/2015 +/- % Import Export Turnover total Balance Source: Customs statistics, NRA The data in Table 3.15 show that in 2016 the total quantity of exported and imported non-ferrous metals that form the foreign trade turnover decreases by tons (4.4%). The reasons are the export drops of the copper (anodic and electrolytic), of the lead ingots and of R/P of HNFM and the decreased import of copper waste as well. In the same time the import is increasing by aluminium ingots, lead and their alloys and some copper products. As an end result the balance in terms of quantity shows a decrease with more than 86 thousand tons. In terms of value the foreign trade turnover is also on decrease (by 18.4%), as a result of the export drop and the lower value of the import. However the balance is keeping positive with a value of BGN million favorable effecting the foreign trade balance of Bulgaria. Table 3.16 Foreign trade turnover of non-ferrous metals, BNG million Indices Difference 2016/2015 % +/- % Import Export Turnover total Balance Source: Customs statistics, NRA

72 SALES OF NON-FERROUS METALS AND R/P METALS Table 3.17 and Fig present a company information on sales of Bulgarian production of non-ferrous metals and R/P products for the period Data show that in 2016 the sales structure changed in favor of the local market, accounting for 12.1% of the total sales (10.9% in 2015). The export accounts for 87.9% of the metallurgical production (89.1% in 2015). Table 3.17 Sales of non-ferrous metals and R/P metal, tons Products Sales Anodic copper Electrolytic copper Home market Export Total Home market Export Total Lead Home market Export Total Zinc Home market Export Total R/P NFM Home market Export Total Aluminium R/P Home market Source: Company data, Export Total Electrolytic copper % of the sales are realized on the international market and 13.6% remain for home consumption. The sales on the home market increased by tons, respectively the final home consumption increased in 2016 (Table 3.18).

73 Lead and lead alloys % of the sales are realized on the international markets, the rest of 27.9% are for the local market. In the last three years there is a trend for increase of the quantities sold at the local market. Zinc the export increased and is 91 % of the production, 9% are sold on the home market. In 2015 the ratio was 82% /18 %. R/P NFM - in 2016 deliveries for the home market remain on the level of the previous year only 2.8 % of the total sales. The production is mainly sold on the international market. R/P aluminium total sales of all three producer companies are increasing by 4.9 %. The R/P aluminium sales on the home market decreased and is coming to 6.5% and the export is increasing its share is respectively 93.5 %. The structure of general sales of basic and R/P metals for the last five years according to company data is presented on Figure Figure 3.16 Figure 3.16 shows that the NF metallurgy in Bulgaria is a sector with a clear export orientation as the export exceeds many times the sales on the home market CONSUMPTION OF NON-FERROUS METALS AND ALLOYS Table 3.18 illustrates the real home consumption (RHC), as formed by the sum of sales of non-ferrous metals on the home market according to data supplied by the Bulgarian producers and the import reported by the Customs Agency and the NRA from 2012 to In 2016 ca. 61 % of the home consumption of the basic non-ferrous metals (copper, lead and zinc) are covered from the national production and the share of imported metals is 39%. The real home consumption (RHC) increased by the copper and the lead and by zinc it decreased almost two times.