Ukraine’s iron ore may fall short on 2006 events
Although the country recorded an increase in iron ore production this year, Ukraine predicts an iron ore supply deficit of nearly 1.59 million metric tons in 2006 with Mittal's Kryvorizhstal takeover and accession to World Trade Organization. Ukraine's iron ore and iron ore concentrate production increased by 3.6 percent, or 204.5 thousand metric tons, month on month to 5.95 million metric tons in October, according to the Cabinet of Ministry. Compared to September, production of iron ore increased by 0.6 percent, or 8'300 metric tons, to 1.34 million metric tons. The production of iron ore concentrate increased 4.4 percent, or 196'200 metric tons, to 4.61 million metric tons. Meanwhile, sinter production increased 6.4 percent, or 256'200 metric tons, to 4.24 million metric tons, and pellet production increased 7.8 percent, or 102'100 metric tons, to 1.42 million metric tons. Total iron ore production through the first ten months increased 3.6 percent, or 1.98 metric million tons, year on year to 56.7 million metric tons. Total sinter production in the first ten months increased 0.9 percent year on year to 43.88 million metric tons, while pellet production increased 7 percent to 14.54 million metric tons. However, according to Vasiliy Kharakhulakh, General Director of the Production and Economic Association “Metallurgprom”, there will be a supply deficit next year due to production cuts in some major plants. Kharakulakh indicates that Illicha Metallurgical Plant in Mariupol will see a production deficit as high as 1.09 million metric tons. Furthermore, the metallurgical plant in Alchevsk could see a deficit as high as 500 thousand metric tons. However, a shortage is not necessarily likely considering the above mentioned production figures and the fact that iron ore inventories totaled 1.78 million metric tons at the beginning of November. Before a shortfall in iron ore production could be talked about realistically, one would first have to see what Mittal plans to do in regards to the recently acquired Kryvorizhstal and Ukraine's accession to the World Trade Organization. Through the first ten months of the year, Ukraine's production of rolled products decreased one percent to 26.49 million metric tons, cast iron two percent to 25.35 million metric tons, and steel two percent to 31.79 million metric tons. The decreases were a function of both a drop in global demand and the quotas applied on the country. Now, if Mittal makes the necessary investments and increases the production at Kryvorizhstal, and if Ukraine joins the World Trade Organization smoothly, then a shortage of iron ore could be talked about as a realistic possibility. Should a shortage in iron ore production indeed materialize, Ukrainian steel mills' production would not be affected very much. However, iron ore exports from Ukraine will probably decrease.