Analysis of the CIS Raw Materials

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SteelOrbis Spring 06 Steel in the Raw
Conference 54th IREPAS Meeting
Analysis of the CIS Raw Materials
Andrey Pupchenko, Head of Raw Materials Research,
Metal Expert Research Group, Ukraine
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What Metal Expert are

• a part of Metal Courier information agency
  established in 1996.  
• a reliable regional source for the CIS steel and
  raw materials markets.  
• supplier of daily news, monthly analytical
  bulletins, quarterly forecasts, special reports
  and consulting services both in English and
  Russian.  
• all the products in English are customized for
  the needs of the companies and specialists
  working with the CIS.

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The main points of the presentation 

• The main focus is on ferrous scrap
• Steel sector influence on raw materials
• Forecasts of ferrous scrap consumption and export

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The main focus is on ferrous scrap
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The main focus is on ferrous scrap
World ferrous scrap deliveries
Source International Steel Statistical Bureau
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The main focus is on ferrous scrap
Ukrainian scrap collection decreased in 2005 by
2.2m tonnes vs 2001 figure
000 tonnes
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The main focus is on ferrous scrap
whereas consumption in the domestic market
increased by 1m tonnes
000 tonnes
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The main focus is on ferrous scrap
Domestic market prevail in Ukrainian scrap
deliveries
2004
2005
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The main focus is on ferrous scrap
Correspondingly, export of ferrous scrap from
Ukraine decreased substantially
000 tonnes
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The main focus is on ferrous scrap
Strategical points of the Ukrainian ferrous scrap
industry

• Obsolete scrap reserves run out
• A significant consolidation of the market
  operators took place in Ukraine in 2004-2005
• The market is still under the restrictions
  adopted by government

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The main focus is on ferrous scrap
Ferrous scrap collection in Russia almost
stabilized in 2005
000 tonnes
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The main focus is on ferrous scrap
although deliveries into Russian domestic market
is still growing
000 tonnes
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The main focus is on ferrous scrap
The share of domestic market in scrap deliveries
have increased in Russia
2004
2005
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The main focus is on ferrous scrap
Will huge ferrous scrap export from Russia be
sustained?
000 tonnes
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The main focus is on ferrous scrap
Strategical points of the Russian ferrous scrap
industry

• the industry still has a great potential
• the structure of scrap export from Russia is
  rather diversified
• moderate export duties (EUR15 or 15)

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• The future export flows of ferrous scrap from
  Russia and Ukraine will be defined by
• domestic market situation
• dynamics of world scrap prices

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Steel sector influence on raw materials
Steel export prices - which way to follow up or
down?
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Steel sector influence on raw materials
Turning point in steel industry prices to go
down

• surplus of the steelmaking capacities in the
  world market
• weakening influence of raw materials factor
  upon pricing due to increase in supplies of raw
  materials
• reduction of steel output (and, consequently,
  the consumption of raw materials) in such regions
  as EU-25 and North America

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Steel sector influence on raw materials
Turning point in steel industry prices to go
down
Consequences

• prices in the world market of steel products
  will be preserved in a medium-term perspective at
  a current, relatively low, level
• steelmakers will start to compete by reducing
  production costs
• Likely bankruptcies of non-competitive producers
  will result in partial suspension of production
  facilities
• further consolidation of buyers of raw
  materials, i.e. their negotiating positions will
  be strengthening
• a growing number of anti-dumping investigations
  will result in lower export supplies, including
  those from CIS

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Steel sector influence on raw materials
Will CIS steelmakers continue their growth even
at descending world market?
Are they competitive enough?
What route will be chosen pig iron or
electrometallurgy?
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Steel sector influence on raw materials
Semi-finished steel production cost, per tonne
EXW
Source Metal Expert Research, WSD
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Steel sector influence on raw materials
The main competitive advantages of Russian
steelworks

• high quality of raw materials both coking
  coals and iron ore in comparison with Ukrainian
• sufficient investments that have been made by
  the majority of Russian steelmaking enterprises
  during recent 5 years
• - the growth of continue casting share
• - open hearth furnace replacement
• The share of steel products deliveries into
  domestic market is growing

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Forecasts of ferrous scrap consumption and export
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Forecasts of scrap consumption and export
Raw materials consumption growth or
stabilization?
Russia

• low production costs
• plans of steelmakers and a number of new projects
  of mini-mills
• replacement of open-hearth production will
  restrain the growth of steel output in Russia

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Forecasts of scrap consumption and export
Raw materials consumption growth or
stabilization?
Steel production is to increase
Russia 2004-2007
ferrous scrap consumption is to grow
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Forecasts of scrap consumption and export
Estimation of ferrous scrap consumption growth in
Russia, million tonnes
2006 2007
new steelmelting capacities 3.2 2.65
increased share of continuous casting 0.85 1.2
at current steelmelting capacities 0.35 1
Total 4.4 4.85
Estimation Metal Expert Research
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Forecasts of scrap consumption and export
Estimation of ferrous scrap export from Russia,
000 tonnes
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Forecasts of scrap consumption and export
Raw materials consumption growth or
stabilization?
Ukraine

• High production costs
• A lack of preconditions for more investments in
  the enhancement of production capacities
• A need to replace open-hearth production
  facilities with BOFs

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Forecasts of scrap consumption and export
Raw materials consumption growth or
stabilization?
Steel production to remain stable
Ukraine 2004-2007
whereas collection is to decrease
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Forecasts of scrap consumption and export
Estimation of ferrous scrap export from Ukraine,
000 tonnes
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Ferrous scrap availability from CIS countries to
decrease substantially in two years period
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Starting from March 2006, CIS Raw Materials
Monthly subscription package includes more
extensive information on scrap market - Ferrous
Scrap Market Forecast (updated every 10 days)
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Thank you very much for your attention
andrey_at_metalcourier.com