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Ukraine Metals Report Q1 2013
Business Monitor International, January 2013, Pages: 52
BMI's Ukraine Metals Report for Q1 2013 examines recent trends in the Ukrainian steel and aluminium industries and examines how the domestic and external market outlooks will influence the rate of recovery in output over the next five years. The report considers how steelmakers are dealing with challenges to external competitiveness and weakening demand and analyses the growth and risk management strategies being employed by the leading players in the metals industry.
There is optimism that 2013 will witness stabilisation with the Ukrainian association of metal producers Metallurgprom forecasting monthly crude output of 2.76mn tonnes (mnt) in January 2013 and rolled steel production of 2.52mnt. Metallurgprom is forecasting crude output of 34.4mnt and rolled output of 31mnt. BMI believes this is overly optimistic given the external context, which is dominated by the eurozone crisis and European over-capacity. Ukraine has the added disadvantage of an over-valued hryvnia, which has made Ukrainian steel exports uncompetitive. Recent currency weakening may not be sufficient to ameliorate the situation. The most recent example of the ongoing decline in Ukrainian steelmaking is the closure in November of Mechel's 1mntpa EAF in Donetsk due to weak markets and poor export demand. Mechel is trying to sell the loss-making plant to drive down its own debt, but has failed to attract interest.
Over the last quarter, BMI has revised the following forecasts and views:
- In 2012, Ukraine's crude steel output fell by an estimated 5.5% year-on-year (y-o-y) to 33.4mnt,
which is below the 34.3mnt previously forecast. Exports of semi-finished steel products fell 3.3% y-o-y to 8.46mnt in the first 10 months of 2012 with the decline seeming to deepen towards the end of the year.
- As a result of slow domestic economic activity and lack of external competitiveness, BMI forecasts just 1% growth in crude steel output volumes in 2013, largely driven by inventory rebuilding.
- The probability of capacity rationalisation precludes any return to pre-2008 levels of production.
BMI forecasts 2017 crude output at around 39mnt with a recovery likely to begin in earnest in 2014
- Problems at aluminium smelter Zalk mean that Ukrainian aluminium consumption now exceeds production. If this trend does not reverse, it would pose significant risks to our view that aluminium production would return to previous levels over the forecast period.
Executive Summary 5
SWOT Analysis 6
Ukraine Business Environment SWOT 6
Europe Metals Overview 7
Industry Forecast 13
Table: Ukraine - Steel Production & Consumption ('000 tonnes, unless stated otherwise), 2009-2017 14
Table: Ukraine's Steel Industry Historical Data ('000 tonnes, unless stated otherwise), 2003-2010 15
Table: Ukraine - Primary Aluminium Production & Consumption (mn tonnes, unless stated otherwise), 2009-2017 16
Macroeconomic Outlook 17
Table: Ukraine - Economic Activity, 2011-2016 18
Commodities Forecast 19
Monthly Metals Update 19
Table: Select Commodities: Performance & BMI Forecasts 31
Steel Forecast 32
Steel To Average US$360/tonne In 2013: Short-Term View 32
Table: Steel Forecast 32
Table: Steel Forecasts 38
Competitive Landscape 39
Company Profiles 43
Table: ArcelorMittal - Key Financial Data 46
Financial Data 50
Table: UC RUSAL - Financial Data, 2006-2011 50
BMI Methodology 51
How We Generate Our Industry Forecasts 51
Cross Checks 51