Supply, demand and new players Roman Chigirinsky, Senior Analyst
Macroeconomic Indicators
Apparent consumption of finished steel products 000 tonnes 2007 2008 2009 2010 2011 2012 2013* Russia 40,379 35,419 24,944 35,630 40,994 41,813 20,963 Ukraine 8,052 6,874 3,832 5,317 6,326 5,715 3,107 Belarus 2,304 2,475 1,824 2,578 2,494 2,755 1,292 Kazakhstan 2,973 2,420 2,647 2,103 2,276 2,818 1,420 Other CIS 2,628 2,853 2,714 2,554 2,739 3,366 1,476 Total CIS 56,337 50,041 35,962 48,182 54,829 56,467 28,258 Source: WSA
Apparent consumption of coated flat steel 000 tonnes 2009 2010 2011 2012 2013* Russia 3,077.5 4,181.1 4,897.3 5,613.2 2,769.2 Ukraine 451.2 619.8 721.7 735.6 328.7 Kazakhstan 219.7 267.2 278.1 331.3 165.5 Belarus 130.6 183.6 161.4 206.6 110.1 Source: WSA
Russia: key producers Coated steel production, 000 tonnes 2010: 723.0 2011: 981.4 2012: 975.5 KASHIRA PLANT (KZSP) 2010: 242.0 2011: 269.3 2012: 262.9 UNISTUD 2010: 55.3 2011: 59.1 2012: 76.3 2010: 912.2 2011: 1,007.3 2012: 1,062.1 SAMARA RESERVOIR PLANT 2010: 63.5 2011: 47.2 2012: 88.8 MMK 2010: 1,030.5 2011: 926.4 2012: 1,185.2 AK LMZ 2010: 170.5 2011: 211.3 2012: 209.8
Russia: coated steel production 000 tonnes 2006 2007 2008 2009 2010 2011 2012 2013* HDG - - - 1,580 2,150 2,305 2,450 1,300 PPGI - - - 820 835 1,040 1,300 770 Tin plate - - - 235 210 140 150 80 Total 2,879 2,975 2,992 2,635 3,195 3,485 3,900 2,150
Russia: coated steel exports 000 tonnes 2009 2010 2011 2012 Belarus 63-83 93 Uzbekistan 52 62 54 82 Ukraine 60 92 84 51 Azerbaijan 36 39 31 33 Other countries 219 167 28 31
Russia: coated steel imports 000 tonnes 2009 2010 2011 2012 China 160 570 620 550 Belgium 60 80 125 220 Ukraine 50 70 115 160 South Korea 30 55 75 160 Turkey 15 10 30 160 Other countries 505 415 315 420
Russian market trends Russia is the largest producer and consumer of coated steel in CIS Existing production capacity is not sufficient to satisfy domestic demand (imports account for 30% of the country s consumption) In recent years coated steel consumption has been growing by 15-20% annually This is driven by large scale infrastructure projects and growth in certain industrial sectors The main consuming industries are construction (75%) and machine building (15%) Other industries account for 10% The share of polymer coated steel (PCS) is constantly increasing 2000: HDG 85%, PCS 15% 2012: HDG 60%, PCS 40% What is the final product? Russian producers often do not pay attention to customers needs and do not know the final product or how it will be used Price the key factor! The majority of consumers are often ready to sacrifice quality for price: steel with low zinc coating is very popular Over the past several years leading producers have increased investment in their foreign production facilities No major domestic expansion plans have been reported recently
MODULE - UKRAINE 2010: 19.8 2011: 21.9 2012: 50.3 Ukraine: key producers Coated steel production, 000 tonnes METALS & POLYMERS 2010: 10.1 2011: 16.3 2012: 38.9 UNISTEEL 2010: 9.0 2011: 15.3 2012: 12.2 ILYICH IRON & STEEL 2010: 196.0 2011: 260.4 2012: 319.3
Ukraine: coated steel production 000 tonnes 2006 2007 2008 2009 2010 2011 2012 2013* HDG - - - 215.1 227.3 300.5 383.4 158.7 PPGI - - - 17.8 33.4 26.9 40.1 25.4 Other - - - 5.2 8.7 7.5 6.8 2.8 Total 306.7 349.3 425.9 238.1 269.4 334.9 430.3 186.9 000 tonnes
Ukraine: coated steel exports 000 tonnes 2009 2010 2011 2012 Russia 47.4 76.2 126.9 159.1 Azerbaijan 7.1 4.6 5.0 6.1 Moldova 4.3 6.5 6.2 3.2 Other countries 14 11.3 5.7 3.4
Ukraine: coated steel imports 000 tonnes 2009 2010 2011 2012 China 20.7 51.6 111.2 128.4 Russia 59.8 92.1 84.5 51.3 Kazakhstan 44.3 48.1 43.8 15.4 Slovakia 32.1 54.0 60.2 38.8 Turkey 5.5 9.1 29.7 60.9 Poland 36.4 39.3 28.4 39.1 Other countries 94.2 135.8 147.2 141.1
Ukrainian market trends Ukrainian coated steel market is the second largest in CIS In recent years consumption has been growing by 5-12% annually, with increasing share of polymer coated steel The main consuming industries are construction (85%) and machine building (8%) Other industries account for 7% One large producer Ilyich Iron & Steel, recently acquired by Metinvest Group, is the only Ukrainian producer with complete production cycle. However, domestic demand for coated steel produced by this plant is moderate due to insufficient quality. Other producers? Module-Ukraine, Metals & Polymers and Unisteel mainly produce HDG and PPGI using imported coils. Coil painting line of AZST-Color, a part of RUUKKI, is on standby. Sources of imports are diverse Unlike Russia, Ukraine imports coated steel from a wide range of countries: from cheap Asian products to expensive material of European origin Capacity expansion under question Most projects have been suspended over the past two years due to unfavourable market situation. These include an earlier announced project to launch coated steel facilities at Zaporizhstal (by 2018) as well as a new facility to produce flat steel for automotive industry in Rivne region.
Kazakhstan Production ArcelorMittal Temirtau is the largest and virtually the only flat steel producer in the country 000 tonnes
Kazakhstan and other CIS markets KAZAKHSTAN The monopolistic coated steel producer in the country is ArcelorMittal Temirtau, which controls the local market and exports to all CIS destinations. Dependence on exports is high (around 80% of coated steel is exported). Coated steel from Kazakhstan is quite popular across the CIS due to its good quality and reasonable prices. The company has a wide trading network in Russia and Ukraine. Increasing domestic consumption provides new opportunities mainly for Asian and Russian suppliers. BELARUS This country is an important player on the CIS market, with an annual coated steel consumption around 200,000 tonnes. The main consuming industries are construction, machine building, and tool engineering. The country s steelmaking plant BMZ considers launching a flat steel production facility with an annual capacity of 500,000 tonnes, of which 100,000 tonnes would be allocated for coated steel. UZBEKISTAN Increasing consumption of coated steel is driven by construction (infrastructure projects) and modernization of local heavy industry and machine building. In 2013 consumption is expected to exceed 100,000 tonnes.
Russia, Ukraine, Kazakhstan: price indicators HDG domestic, USD/t, EXW, excl. VAT HDG exports, USD/t, FOB
Apparent consumption (coated steel), 000 t Russia: China s impact 2009 2010 2011 2012 2013* 3,077.5 4,181.1 4,897.3 5,613.2 2,769.2 Import from China, 000 t 160 570 620 550 190 China s share in coated steel imports, % 19 48 49 33 29 China s share in Russian imports is declining: Protection measures taken by Russian authorities Chinese suppliers switch to deliveries of finished products produced from coated steel (galvanized siding, etc.)
Apparent consumption (coated steel), 000 t Ukraine: China s impact 2009 2010 2011 2012 2013* 451.2 619.8 721.7 735.6 335.7 Import from China, 000 t 20.7 51.6 111.2 128.4 60.1 China s share in coated steel imports, % 7 12 22 27 25 Imports account for 64% of Ukrainian consumption, China s import share is 27%: High export orientation of Ukrainian producers (prices in Russia are more attractive) Cheap Asian imports (low paying capacity of Ukrainian buyers, convenient logistics)
Conclusions and Forecasts Until 2020 coated steel consumption in all CIS markets will be growing. The shortage of production capacity will remain, and therefore dependence on imports will be high. Construction industry will remain the main consumer of coated steel in all CIS countries, although the role of automaking sector will increase. Preparations for the Olympic Games 2014 and FIFA World Cup 2018 in Russia will significantly boost both domestic and import markets. The market share of polymer coated steel will continue to grow, gradually supplanting simple zinc coated coils. CIS market is one of the fastest growing in the world. At the same time, it is not yet well-structured and organized, consumers are open for accepting new technologies and products, which provides great opportunities for suppliers, producers and equipment manufacturers.
Thank you! MINISTRY OF ECONOMIC DEVELOPMENT AND TRADE OF UKRAINE SC DERZHZOVNISHINFORM 15 Lyubchenko st., Kyiv 03680, Ukraine Global Market Research Phone: +38 044 390-50-74 Fax: +38 044 528-91-56 Email: dzi@dzi.gov.ua www.dzi.gov.ua