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.