Although demand remains weak in the global markets, the steel sector has recently been seeing greater activity in terms of possible acquisitions in Ukraine. Developments regarding the potential sale of certain Ukrainian steel mills have brought some movement to the local market.
First, it was heard that Ukrainian steelmaker Metinvest was seeking to purchase local producer Zaporizhstal. After it was reported that no deal was reached, it was then heard that Zaporizhstal was to be sold to Russian investors. Although there has not been any official announcement, the Ukrainian media have reported that Russian investors, represented by Russian bank Vnesheconombank (VEB), have bought the mill at a cost of $1.7 billion, with no other details being issued so far. At present, uncertainty exists as regards the sales prices of Zaporizhstal's products and also as regards which trading firms will be acting as the mill's agents. Some sources interviewed by SteelOrbis mention that this situation is expected to gain clarity toward the end of the week.
In the midst of the abovementioned developments concerning Zaporizhstal, Metinvest announced that it has started negotiations for the purchase of Ilyich. While nothing is certain yet, it can be expected that if the sale of Ilyich is concluded, then the raw material shortage that Ilyich has been facing for a while will be eased. Anyhow, the raw material supply shortages experienced by Ukrainian steel producers is one of the factors that has speeded up merger and acquisition negotiations in the current year. Metinvest Group supplies raw materials, especially iron ore, to Zaporizhstal and Ilyich from the mines it controls.
Despite all these developments, due to the lack of demand in the market, prices have not yet gained stability in either Ukraine or Russia.
Ilyich's HRC offers are reported to be at $530-540/mt FOB, while it is heard that Zaporizhstal will offer HRC at $550/mt FOB. Russian mill MMK's HRC offers are standing at $550/mt FOB Novorossiysk port and Severstal's offers for HRC have been at $580/mt FOB St. Petersburg.