Evaluation of Ukrainian scrap market in first five months of 2006.. Veniamin Kramer - Ukrainian Metal Scrap Association

Friday, 07 July 2006 17:47:02 (GMT+3)   |  
       

The current situation in the domestic Ukrainian market for scrap, which is characterized by seldom tensions between scrap collectors and consumers, and between other subjects of Ukrainian market, shows a need to change the rules of the game. The need to change the legislative base, to finish the dreadful for the industry practice of demanding attitude of metallurgists toward the scrap industry, to change the negative attitude toward the scrap industry express by the government institutions as well as non understanding attitude of society in general toward the problems experienced by scrap collectors, is becoming more actual and visible. Especially now, when the volumes of scrap collected in the country continue to decrease, the solution to the scrap industry problems need to be found as quick as possible. Brief results of the work of Ukrainian metallurgical industry in January-May 2006 According to the operational, the industrial production rose 2.4 percent year on year in the first five months of 2006 and 10 percent in May 2006 against May 2005. In the first five months the country's production of pig iron rose 0.4 percent, that of crude steel rose 1 percent, that of steel finished products rose 2 percent and that of pipes rose 3 percent year on year. At the same time, the production of ferroalloys decreased 22 percent, that iron ore decreased 1 percent, and that of coke decreased 10 percent. In the first four months the export of ferrous metal from Ukraine rose 1.6 percent (export of long products rose 2.2 percent, that squire billet rose 35 percent, that of slabs rose 17 percent, that of flat rolled decreased 4.8 percent and that of pig iron decreased 25 percent) compared to the same period of 2005. However the export revenue decreased 11.5 percent during the same period. The export revenue decreased partly due to decrease of prices in the world market, but the main factor determined the reduction in export revenue, against the background of rising export volumes in the first five months of 2006, is the rise in volumes of sales made through the offshore companies and, as a consequence, the intentional undervaluation of steel products' export prices. As far as scrap market is concerned, the volume of scrap collected in the country decreased 20 percent year on year to 2.72 million tons in January-May 2006. During the same period, Ukrainian enterprises purchased 2.47 million tons of scrap, which is 4.9 percent less than the level of the corresponding period of 2005. The export deliveries of Ukrainian scrap decreased further, by more than 2.7 times or 64 percent, during January-May of 2006. The structure of Ukrainian scrap market The number of firms, which are working with scrap, continued to decrease in the first five months of 2006. Thus, in the first five months of 2006 the number of registered scrap suppliers in the domestic market decreased by 25 percent from about 480 companies registered in 2005 to 325, while the number of registered exporters fell to 35 companies. However, the number of actual suppliers of scrap to domestic market is even less. Thus, according to the operational data, in the first five months of 2006: one company delivered more than 300,000 tons of scrap to consumers, another one delivered more than 100,000 tons of scrap to consumers, seven firms delivered about 50,000-100,000 tons of scrap each, seven suppliers delivered from 20,000 to 50,000 tons of scrap, and sixteen firms delivered from 10,000-20,000 tons of scrap. In total, only 32 firms, out of 325 supplied 76 percent of the scrap in the domestic market. The export deliveries are characterized by the same tendency. During January-April of 2006, only 35 companies were exporting scrap. Out of these companies, 2 firms exported about 20,000-50,000 tons, two more exported 10,000-20,000 tons and 21 firms exported from 1,000 to 10,000 tons of scrap each. Situation in domestic market In general, during the given period, Ukrainian metallurgical enterprises decreased the volumes of scrap consumption. As far as the procurement price level is concerned, during January-March of 2006 the average level of procurement prices for scrap rose from UAH 860 per ton to UAH 1,040 per ton (including VAT). Throughout April-May of 2006, the level of the procurement prices for scrap was fluctuating in the range of UAH 1,000-1,030 per ton. By the end of the first ten days of June the procurement price for scrap in domestic market rose to UAH 1,050-1,070 per ton due to rise in domestic demand for this raw material. The total volume of scrap inventories by June 2006 decreased more than two times compared to the level of inventories held at the end of December of 2005 and composed about 158,000 tons. Such a decrease was reasoned as by seasonal factor that is decrease in the volumes of scrap collected during the winter period due to cold weather, so by the problems caused by the late payments for consumed scrap made by metallurgical enterprises, which resulted in the lack of financial resources of scrap collected firms. Situation with export During the first five months of 2006, the export deliveries of Ukrainian scrap continued to decrease. The factors responsible for such decrease are the same as those responsible for the decrease throughout 2005. The domestic causes include: still present export duties for scrap export in amount of €30 per ton, problems of VAT rebate from scrap exports, and other measures of non-tariff regulation of scrap export taken by the government, in particular the system of re-registration of scrap exporters with the Ministry of Economy every 2 months. All these problems led to decrease in a number of firms willing to export scrap. The main external factors, on the other hand, include: the price game of Turkish importers, who were trying to lower the purchase prices, and the removal of scrap from free trade regime with Moldova. As a result, the export of scrap from Ukraine decreased 63.5 percent to 247,000 tons year on year in January-May 2006. The decrease in scrap export in particular was shown in deliveries to Turkey, by three times, to Moldova, by 4.2 times, to Egypt, by 20 percent, while the deliveries to Italy, Poland, and Austria were stopped completely. Situation with import While the export deliveries decreased during the first five months of 2005, imports of scrap to Ukraine increased. The main factor which determined the rise in imported volume of scarp, apart from the shortage experienced by Ukrainian domestic metallurgists, is the cancellation of import duty on scrap.

Similar articles

Russia officially imposes export duties for most steel and raw materials until end of 2024

21 Sep | Steel News

China issues steel product export tax rates for 2013

19 Dec | Steel News

The Ukrainian scrap market in 2007.. UAMB President V.A.Kulichenko and UAMB Deputy Director V.Kramer

26 Dec | Steel News

Tangshan sees slight drop in billet prices

01 Feb | Steel News

Tangshan sees slight drop in billet prices

01 Feb | Longs and Billet