European steelmakers to benefit from Ukraine's entry to WTO

European steelmakers to benefit from Ukraine’s entry to WTO

While European steelmakers feel threatened by Ukraine's entry to the World Trade Organization (WTO), it is Ukrainian steelmakers that feel threatened by the prospect. Through January-September 2005, Ukraine's metal exports fell 7.8 percent year on year to 21.4 million metric tons. At the same time, however, the average price increased 27.3 percent to $406/mt. Within the above figure, the export of semi finished products accounted for 7.31 million metric tons, down 2.2 percent year on year. The average price of semi finished products was $328/mt, up 19.7 percent. Scrap exports were down 41.7 percent to 1.05 million metric tons. The average value of the scrap exports through the first nine months was $205/mt, up 5.5 percent year on year. Meanwhile, cast iron exports decreased 14.5 percent to 637'100 metric tons, while the average price increased 16 percent to $252/mt. The exports of other metal products decreased 20.9 percent to 154'100 metric tons with $519/mt average price, up 21.26 percent. Nevertheless, major market players worry about Ukraine's impact on the European market once the country enters the WTO. The latest example is Arcelor CEO Guy Dolle. Dolle claims that the Ukrainian steel exports that enter Europe once the country joins the WTO next year could result in a large increase in supply. This could weigh heavily on prices, asserts Dolle. The remarks come in the wake of the recent tender held for Kryvorizhstal, Ukraine's largest steelmaker. Arcelor rival Mittal Steel won the tender with a $4.8 billion bid. Despite the decrease in exports in general, Ukraine's metal exports to the 25 countries of the European Union (EU) increased five percent to 3.3 million metric tons. Ukraine's metal exports to its neighbors, except Turkey, increased 28.9 percent to 4.8 million metric tons in the first nine months and accounted for 22.4 percent of the country's total exports. Exports to Turkey decreased by 5.2 percent to 2.5 million metric tons, while exports to the Americas, China and South Korea decreased sharply, by around 50 to 60 percent. However, Ukrainian steelmakers have their own worries. The Ukrainian association of metal traders worries that the cost of steelmaking in the country will increase because Mittal, Krivorizhstal's new owner, will pay more for raw materials. Meanwhile, Ukraine's steel industry is mostly outdated, and the domestic steelmakers will not find many opportunities to export their products into the EU markets, especially when they lose their price advantage. The domestic steelmakers think that metal production costs could even increase by as much as $100/mt by the end of this year. To sum up, in 2006 we can expect a stricter competition in European markets since the steelmakers will have some space to reduce their prices thanks to cheaper raw materials from Ukraine. Although raw material prices increase in Ukraine, they will still be cheaper for Europe and abundant in Europe because quotas will be eliminated with accession to WTO. The increase in China's exports to the Americas and South Korea led to a decrease in Ukraine's exports to these regions. 2006 could be a difficult year for Ukrainian steelmakers unless they find ways to reduce production costs, update their facilities or merge with some large scale global steelmakers.