Ukraine will increase steel smelting by 2.7% in 2014, says Ukrpromzovnishekspertyza

Kyiv, December 16 (Interfax-Ukraine) – Ukrainian metal companies will increase steel smelting by 2.7% in 2014 compared with the expected volumes of steel that will be made in 2013, to 34.2 million tonnes.

Director of state enterprise Ukrpromzovnishekspertyza Volodymyr Vlasiuk gave the forecast at a press conference entitled "The Market Balance and Steel Prices in 2014" held at Interfax-Ukraine on December 13.

He said that in 2013, 33.3 million tonnes of steel will be smelted, which is 2.8% up year-over-year (32.394 million tonnes).

Vlasiuk also said that in 2013, Ukraine would export 23.1 million tonnes of rolled steel and 23.6 million tonnes in 2014. Some 6.1 million tonnes of Ukrainian rolled steel will be sold on the Ukrainian market and 6.4 million tonnes in 2014, while around 1.7-1.8 million tonnes of rolled steel will be imported.

The volume of the Ukrainian metal product market in 2013 will amount to 7.8 million tonnes, which is lower than last year (8.3 million tonnes) mainly due to the decline in construction and the fall in production in the engineering sector.

The loading of facilities in Ukraine is 69.9%, which is lower than the global indicator.

He said that the development of the Ukrainian metal product market remains an urgent task for Ukraine, as this will stabilize both the situation in the mining and metal sectors and the country's economy as a whole, especially in the conditions of tough competition on the foreign markets. The expert said that this year steel consumption in the world fell. In China the economic growth slowed and the country is not a driver of the global economy anymore.

"China is entering a quieter phase and we see a slowdown in the pace of growth of steel consumption in the country," Vlasiuk said.

He added that at present, the surplus of steel supply compared with demand is seen, and this is the market of buyers, not sellers, which does not allow prices of metal products to grow.

Vlasiuk said that the net profit of $50 per tonne is required for the stable operation of metal companies, which allows them to pay dividends and invest in development. This sum of the profit could be reached if extra production facilities with a capacity of 300 million tonnes are shut down, mainly in China, which has many inefficient plants using old technologies. Ukraine should complete the stoppage of ineffective and energy inefficient open-hearth production.

In China the cash cost of metal products continues falling, which has created conditions for further export expansion – China has become a net exporter of steel. This year its net exports will reach 47.9 million tonnes.

As for the geographical structure of supplies of metal products by Ukrainian companies he said that in 2013 Ukraine increased supplies to the EU: while in 2012 they were 4.897 million tonnes, in 2013 they were 6.1 million tonnes. Supplies to Turkey and Africa slightly grew, and an additional 300,000 tonnes of metal products were exported to the CIS.

Asked how much metal companies depend on the price of natural gas and if they see advantages in the Customs Union, the expert said that at present this position for the Ukrainian metal sector is not critical. Many Ukrainian companies have switched to pulverized coal injection (PCI) or they are actively introducing this, which has sharply reduced natural gas consumption.

"In general, the share of gas in the structure of the cash cost of steel is around 5-7% per tonne – around $2-4, and there are no grounds for metal companies to support the Customs Union market," Vlasiuk said.