Katerina Yefimenko National Centre for Global Market Research (DZI) Ukraine: geopolitics and ferro-alloys production

Katerina Yefimenko National Centre for Global Market Research (DZI) Ukraine: geopolitics and ferro-alloys production

Production by process (2013) Ukraine Russia EU 27 Oxygen converter, % 74.1 66.3 60.2 Electric arc furnace, % 5.9 30.2 39.8 Open hearth, % 19.9 3.5 - Million tonnes 32.7 68.7 165.9 Ukraine, 2013 74.1 Ukrainian metallurgy is one of the most energy-intensive and raw material consuming industries in the world The share of continuous-casting process is steadily increasing 19.9 5.9 Iron and steel mills develop long-term modernization programs Oxygen converter, % Electric arc furnace, % Open hearth, %

Production Indicators 40 000 000 tonnes 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 2008 2009 2010 2011 2012 2013 2014 (6М) Open hearth Oxygen converter Electric arc furnace Total

How much ferro-alloys are used in Ukraine depending on steelmaking process? Oxygen converter 13.8 kg/t Open hearth 8.5 kg/t Electric arc furnace 50.4 kg/t

Forecast of steel production in Ukraine 2014 2015 000 tonnes Open hearth Pes Opt Pes Opt 4,920 5,530 3,960 5,760 BOF 19,850 22,370 16,940 24,640 EAF 1,430 1,600 1,100 1,600 Total 26,200 29,500 22,000 32,000 Forecast of apparent ferro-alloys consumption in Ukraine 2014 2015 Pes Opt Pes Opt 000 tonnes Open hearth 41.8 47.0 32.5 47.2 BOF 274.2 308.7 237.2 345.0 EAF 71.6 80.6 50.6 73.6 Total 387.6 436.3 320.3 465.8

Key producers of bulk ferro-alloys Kramatorsk Ferroalloy Plant Stakhanov Ferroalloy Plant Nikipol Ferroalloy Plant Zaporizhia Ferroalloy Plant

FeSi75, FeSi70, FeSi65, FeSi45 Ukraine: geopolitics and ferro-alloys production Key producers www.zfz.com.ua FeMn78 (P 0.08-0.1%, C 5.0-7.0%; P 0.6-0.7%, C 5.0-7.0%), FeMn88 (P 0.3-0.4%, C 1.5-2.0%) FeSiMn25 (C 0.1-1.5), FeSiMn17 (C 1.2-2.5) Mn95 (C 0.08-0.2) FeMn78 (P 0.05-0.7%, C 7.0%), FeMn88 (P 0.1-0.4%, C 2.0%) FeSiMn22 (Si 20-25%, C 1.0%), FeSiMn17 (Si 15-20%, C 2.5%) www.nzf.com.ua FeSi75, FeSi70, FeSi65, FeSi45 FeMn78 (P 0.05-0.7%, C 5.0-7.0%), FeMn78 (P 0.3-0.7%, C 7.0%) FeSiMn17 (Si 15-20%, C 2.5%) www.sfz.org.ua FeMn78 (P 0.08-0.1%, C 5.0-6.5%) www.kramfer.com

Production of bulk ferro-alloys ( 000 tonnes) 1600 1400 1200 1000 800 600 400 200 0 2010 2011 2012 2013 2013 (9M) 2014 (9M)

Production of bulk ferro-alloys ( 000 tonnes) 2010 2011 2012 2013 2013 (9M) 2014 (9M) FeSi* 195.5 150.9 119.4 148.8 101.1 111.7 FeMn 280.1 180.5 157.3 83.1 60.2 164.8 FeSiMn 940.4 843.5 734.1 633.4 455.8 593.6 Total 1,416 1,174.9 1,010.8 865.3 617.1 876.1 19% 68% FeSi (45%) FeMn 13% FeSiMn * Based on 45% Si content

Export of bulk ferro-alloys 1 200 000 tonnes 1 000 800 600 400 200 2014 (9M) 0 FeMn FeSi FeSiMn 10% 11% 79% FeMn FeSi FeSiMn

Export of FeMn ( 000 tonnes) 14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 2013 2014 Others 8% ЕU-28 23% 2013 Others 6% ЕU-28 32% 2014 (9M) 69% 62%

70 Export of SiMn ( 000 tonnes) 60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 2013 2014 ЕU-28 23% Others 6% 33% Middle East 31% 2013 SEA 7% Others 2% Middle East 3% ЕU-28 64% 31% 2014 (9M)

16 14 12 10 8 6 4 2 0 Export of FeSi ( 000 tonnes) 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 2013 2014 2013 2014 (9M) 9% Middle East 28% ЕU-28 63% Middle East 4% 6% ЕU-28 90%

Import of bulk ferro-alloys 250 000 tonnes 200 150 100 50 2014 (9M) 0 FeMn FeSi FeSiMn 17% 12% 71% FeMn FeSi FeSiMn

6 Ukraine: geopolitics and ferro-alloys production Import of FeMn ( 000 tonnes) 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 Others 2% EU-28 38% SEA 24% 2013 2014 36% 2013 EU-28 5% South & Central America 1% SEA 5% Other Europe 37% 52% 2014 (9M)

12 Ukraine: geopolitics and ferro-alloys production Import of SiMn ( 000 tonnes) 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 2013 2014 26% SEA 11% Other Europe 17% Central Asia 42% ЕU-28 3% 2013 Others 1% Other Europe 35% 29% ЕU-28 10% SEA 20% 2014 (9M) Central Asia 6%

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 North Africa 5% Central Asia 4% Ukraine: geopolitics and ferro-alloys production Import of FeSi ( 000 tonnes) 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 ЕU-28 17% Other Europe 36% SEA 22% 2013 2014 2013 16% ЕU-28 5% North Africa 7% Central Asia 2% Others 1% SEA 8% Other Europe 58% 19% 2014 (9M)

Current situation Stakhanov Ferroalloy Plant (SFP) is located directly in the conflict area and stopped production of FeSi in August. Other three producers are still operating, trying to compensate the termination of Stakhanov Ferroalloy Plant. Supplies of raw materials, in particular coke, are limited and irregular. Roads, railway tracks and electricity lines are damaged. This poses a threat to manufacturing processes, complicates the supply of raw materials and shipment of finished products. Metallurgical and chemical enterprises terminate production due to damaged infrastructure in the conflict area.

Russia EU Ukraine Global community is implementing financial sanctions against some Russian companies and individuals but it still hasn t significantly changed the political situation in the region. Financial sanctions may slightly slow down the economic growth of Russia. EU trade sanctions against Russia are unlikely in this segment. In September 2014 Russia adopted a decree concerning introduction of import customs duties for some products of Ukrainian origin. Ukraine is considering introduction of counter measures. Ferroalloys have not yet been part of the trade war.

State regulation of the ferroalloy market Association Agreement between Ukraine and the EU Cancelation of subsidies Harmonization of standards Reduction of customs duties

Conclusions Despite instability, Ukrainian producers have increased production and exports for 9 months of 2014. The industry is export oriented. Significant manganese reserves in Ukraine allow expanding new capacities for production of manganese ferro-alloys. Export to Russia remains unchanged or slightly higher. Russia's share in the export structure is reduced. Ukraine continues to create conditions for transparent international trade according to the agreement with EU. We are open for new technologies and products, providing great opportunities for suppliers, producers and equipment manufacturers.

Thank you for attention! Katerina Yefimenko Senior analyst of non-ferrous and ferro-alloys department National Centre for Global Market Research (DZI) k.yefimenko@dzi.gov.ua Tel./fax: +38 (044) 5289235