According to the Ukrainian Foundation for Effective Governance (FEG), in 2009 Ukrainian steel producers will see a 25-40 percent year-on-year decrease in their exports, from 26.8 million mt in 2008 to 16-20 million. Signs of increased exports could be seen starting from 2010; however, Ukrainian steel production output and exports are thought likely to reach the levels of 2007-2008 not earlier than 2014-2015.
According to FEG consultant and partner at management consulting firm McKinsey, Avetik Chalabyan, the current situation is due to the shortening of demand in the main export markets, and to the introduction of protectionist measures by the main steel consumers. "In January 2009, Russia imposed a 15 percent duty on imported steel products. Exports to Turkey, which is one of the biggest consumers of Ukrainian steel, are under threat, as this country is creating its own capacities so as to become within the next two-to-three years a deficit-free player not only in longs, but also in flat steel products," said Mr. Chalabyan.
In addition, for 2009 the FEG also forecasts a sizeable decrease in Ukrainian domestic steel demand - by about 25-20 percent. "In the Ukrainian construction industry about 60 percent of projects have been frozen, pipe production has decreased by more than half, while the machine-building companies are also in a difficult situation. All these branches consume about 80 percent of steel in Ukraine," stated Mr. Chalabyan.
Moreover, the FEG experts also say that, in the long-term outlook, there is a danger that Ukrainian steelmakers will lose competitiveness and market share, due to the increase by Middle East countries of their own capacities, and due to the aggressive competition from Russian and Chinese steel producers, which are actively working to increase their production efficiency and competitiveness using government support.