Recently Released Market Study: Ukraine Metals Report Q3 2012

New Materials research report from Business Monitor International is now available from Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 21 October 2012

BMI's Ukraine Metals Report for Q3 2012 examines the effects of the eurozone crisis on the steel industry's recovery prospects and forecasts an eventual recovery of the sector over the medium-term. The report considers how importers are maximising sales in the Ukrainian aluminium market, while minimising investment risk and also explores the impact of rising energy costs on domestic smelting operations. The report also analyses the growth and risk management strategies being employed by the leading players in the metals industry as they seek to improve their competitiveness in an increasingly difficult operating environment.

In the first four months of 2012, Ukraine increased finished steel product output by 1.2% y-o-y to 9.66mn tonnes (mnt) and raised pig iron production by 0.6% to 9.60mn tonnes but reported a 4.7% decrease in its crude steel output to 11.13mnt, according to the country's official statistics. However, the World Steel Association's figures show output of 10.5mnt, down 11.5% y-o-y. At the same time, Ukraine's exports of steel products decreased by 11.3% y-o-y to 5.41mnt. Meanwhile, demand for rolled metal products in Ukraine fell 2.9% y-o-y in Q112 to 1.69mnt. The reduction in output was related to the upgrading of an ArcelorMittal mill that disrupted production, as well as lower output at Azovstal.

View Full Report Details and Table of Contents (http://www.fastmr.com/prod/451405_ukraine_metals_report_q3_2012.aspx) (http://www.fastmr.com/prod/451405_ukraine_metals_report_q3_2012.aspx)

A faster return to pre-recession output levels could be achieved if Metinvest brings forward its programme to double output to approximately 30mn tpa. In December 2011, Metinvest said it would invest about US$1.0bn in its Yenakiyeve Iron and Steel Works to boost the plant's annual output to 4.5mn tpa from 2.7mn tpa.

The future of the aluminium industry remains in doubt even if Rusal's appeal against the renationalisation of the Zaporozhye Aluminium Smelter (Zalk) fails. At its height, Zalk produced 227,000tpa alumina and 113,000tpa of primary aluminium while under Rusal ownership. However, the collapse in aluminium prices following the 2008 financial crisis made the plant uneconomic to run due to its inefficient energy usage and high tariffs. Output from the smelter fell to 50,000 tonnes in 2009 and just 25,000 tonnes in 2010, the worst performance in the Rusal group. Nationalisation is unlikely to harm Rusal's competition for the Ukrainian market, given the plant's high cost production.

BMI has maintained its 2012 forecast of 1.9% growth in crude steel output. In addition, crude steel production will only reach pre-crisis levels by the end of our forecast period around 2015 and 2016 at the earliest.

Problems at Zalk mean that Ukrainian consumption now exceeds production. If this trend does not reverse, it would pose significant risks to our view that aluminium production would return to previous levels over the forecast period.

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