Memo from Moscow
Steel News from Russia and Ukraine
Steelmaking Raw Materials in Ukraine, March 2009
Ukraine is one of the world's ten leading producers of steel. According to statistics published by Ukrainian Minprompolitiki, 2008 steelmaking raw material production levels were as shown below.
| Production, milllions tonnes | 2007 | 2008 |
| Coking coal production | 28.4 | 26.6 |
| Coking coal delivery to domestic coke plants | 15.4 | 15.1 |
| Import of coal and concentrate | 10.2 | 9.8 |
| Production of total coke | 19.2 | 20.1 |
| Metallurgical coke production | 20.5 | 19.5 |
| Extraction of iron ore | 77.4 | 71.7 |
| Production of prepared iron ore materials | 72.1 | 63.5 |
| Pig iron output | 51.5 | 48.3 |
| Crude steel production | 42.6 | 37.1 |
| Scrap deliveries to steelmakers | 7.0 | 5.8 |
| Ferroalloys production | 1.7 | 1.4 |
Coal and coke
According to Ukrkoks Ukrainian coking coal production in 2008 decreased by almost 10% to ~26.6 mt output. The Ukrainian by-product coke sector (which includes ~16 coking plants in Ukraine) typically consumes about 25 mt of coal and makes about 20 mt of bulk metallurgical coke.
Some shortage of coking coals and of metallurgical coke is however quite usual in the Ukraine, and some of the volumes involved can be quite large.
Thus in 2008, Industrial Union of Donbass transported around 1 mt of coke from the USA and Canada. Russian coal imports into Ukraine amounted in 2008 to about 8 mt.
Iron ore
The proven iron ore reserves of the Ukraine are thought to be large enough to serve the domestic industry for at least 50 years. Additional reserves are considered likely to provide a further 100 years of supply.
Ukrainian iron ore extraction and processing plants in 2008 produced ~56.7 mt of iron ore concentrate, ~43 mt of sintering ore, and ~20.4 mt of pellets.
Ukrainian iron ore is supplied by many mines: these include the Metinvest Group (Inguletsky, Northern, Poltavsky, Southern, Central), ArcelorMittal Krivoy Rog, Sukhay Balka, and the Zaporozhsky iron ore combine. Almost all of these mines are located in the Dnepropetrovsk area.
In Ukraine, in contrast to the situation in Russia, the process of vertical integration is still in its infancy. Independence of mining from metallurgy - and the chance to buy iron making raw materials from the Russian combines of Kursk magnetic anomaly located nearby - allows significant volatility in the supply channels. Domestic iron ore pricing in Ukraine is as a result much more volatile than it is in Russia.
In Ukraine there are two mining holdings – Metinvest (controlling about 60% of the Ukrainian iron ore market) and Finance & Credit (operating as iron ore supplier to all steel making companies).
Import of iron ore (as concentrate, pellets, sinter) to Ukraine in 2008 is also significant, and in 2008 amounted to 2.7 mt (versus 3.6 mt in 2007). Key buyers of Russian iron ore include Mariupolsky, Ilyich, Enakievsky, Donetsky and Alchevsky steel plants.
The mining enterprises of the Ukraine export about 1/3 of their extracted iron ore volumes. In 2008 total export of iron ore amounted to ~22 mt (+ 5.1%), including export of concentrate of 6.4 million t (+33.7 %), 6.8 mt of sinter, 8.7 mt of pellets. The main exporters of pellets are Ferrexpo Poltava Mining (7.5 million t), Northern and Central Mining (~1 and ~2 million t respectively).
Until recently there were quite large volumes of export to Central Europe. In recent years however more and more of the export has moved to Asian markets. Growth of exports to Asia is however limited by shortages of transshipment capacities in the Ukrainian seaports (where there is no possibility to operate with deadweight tonnage greater than 100,000 tonnes due small depth ~13-15 m of the main ports). Whilst some Ukrainian traders use Romanian seaports, the Ferrexpo Poltava mining-processing plant owned by Konstantin Zhevago is currently building an export terminal for pellet exports. This will have a capacity of ~5 million t/year.
Scrap
The total metals pool in the Ukraine is though to amount to ~ 350 million tonnes. In 2002 this pool was about 411 mt; export of some 70-75% of total Ukrainian steel production has accounted for the depletion.
The main scrap market players are Prometey, KievVtorMet, MAIR.
The volume of scrap collection for 2008 was ~7.7 million t (close to the 2007 level). Because of a sharp decrease in scrap collection rates across December 2008-January 2009, recent scrap deficiencies have appeared.
Scrap exports from Ukraine are significant. In 2008 - notwithstanding export duties - these amounted to ~637kt. Typical export destinations include Turkey, Egypt and Moldova.
Ferroalloys
According to UkrFA 2008 production of ferroalloys was ~ 21% down on 2007 and amounted to 1,419 kt. In November 2008 all main Ukrainian ferroalloys plants stopped production, but commenced production at low levels of capacity utilisation in early 2009. Ukraine ferroalloys production statistics in the last two years are shown below.
| Ferroalloy production, kt | 2007 | 2008 |
| SiMn | 894.9 | 1218.9 |
| FeMn | 362.4 | 357.5 |
| FeSi | 152.8 | 218.7 |
Within these figures, it was the Zaporozhsky Ferroalloys Plant, the Nikopolsky Ferroalloys Plant and Stakhanovsky Ferroalloys plant that accounted for the bulk of ferroalloy output.
| 01-Feb-09 | 2008 year end review |
| 01-Jan-09 | Impact of the credit crisis |
| 01-Dec-08 | Consolidation |
| 01-Nov-08 | Investment activity |
| 01-Oct-08 | Stainless steel sector in Russia |
| 01-Sep-08 | 2007 Russian steel industry review |
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