1. World Steel Market and Ukrainian metallurgy in 2010
SE UPE Co. Research & Consulting
World Steel Market and Ukrainian metallurgy in 2010
Vlasyuk V.S.
SE UPE Co. Research & Consulting, Ukraine
30th September 2010

2. 1. Record world crude steel production
I. World steel market development
1. Record world crude steel production
Source: WSA, *UPE Co. estimation
World steel production in 2010 will beat record pre-crisis level 2007 by 50 Mt and will be around 1390 Mt. It has resulted in the increase of demand and prices for raw materials: for iron ore by +111%, for coking coal by +64% to the level 2009 year

3. 2. Current global macroeconomic situation
I. World steel market development
2. Current global macroeconomic situation
GDP growth in China, USA and Eurozone
*6m 2008=100%
Source: National Statistics Agencies, IMF
In 1H 2010, USA and Eurozone has not reached the pre-crisis level (6 m 2008) yet, whereas Chinese economy is rising despite the global economic turmoil. This year USA economy may reach pre-crisis level, while Euro area economy - not earlier than in

4. 3. Recovery of crude steel production by regions
I. World steel market development
3. Recovery of crude steel production by regions
1H 2008 = 100
Source: WSA, UPE Co.
Growth rate of steel production in the regions is different. Developed economies are still under pre-crisis level, but China and India have demonstrated strong performance throughout

5. 4. Crude steel production in China and the other world
I. World steel market development
4. Crude steel production in China and the other world Mt
Source: WSA, *UPE Co. estimation
Record steel production in 2010 is primarily provided owing to China. Namely additional demand for raw materials from China caused global raw material prices increase. Such an impact of China has affected majority steel producers all around the world

6. I. World steel market development
5. Raw price increase
Itabira fines, 64.2% Fe $/t fob Brazil (to Asian market)
$/t fob Australia, Peak Downs
Source: UPE Co.
Enhancing demand for raw materials have resulted in the iron ore price raise by 111% and the coking coal price raise by 64% y-to-y in 2010

7. 7. Excessive steel capacities
I. World steel market development
7. Excessive steel capacities
World capacity input and steel production, mln. tonnes
Capacity utilization, %
475 Mt
Source: WSA, OECD, UPE Co.
Intensive input of new steel capacities has continued despite crisis in
and currently about 475 million tons of capacities stay idle due to lack of markets

8. I. World steel market development
8. Post-crisis changes in the world steel market
Before crisis
After crisis
Demand
High at all regions
Low or scanty
except China
Profitability
high: +9% ÷ +19%
low: -12% ÷ +15%
Capacities
Deficit and
Excess and
high utilization
85-90%
low utilization
68-74%
mln. tonnes
Utilization, %
Post-crisis situation on the global steel market fundamentally differs from pre-crisis one. The main distinction lies in keeping of high production cost on the back of excessive and underused capacities. That situation will intensify competence and “erase” technologically outdated productions, especially depleted of their own raw materials base. Obsolete enterprises with raw materials base will be forced out into the segments of pig iron and semis.

9. I. World steel market development
9. Steel price dynamics
Source: UPE Co.
Since 2Q2010 prices have been growing slowly mostly because of increasing cost price.
At the same time fundamental demand factors remain weak in developed countries.

10. 12. Ukrainian crude steel production
II. Ukrainian steel sector development
12. Ukrainian crude steel production
*estimation
Source: UPE Co.
Under conditions of weak market demand the volume of steel production in Ukraine has reduced to the level of a decade ago (to 33 Mt or 23% less than record pre-crisis production in 2007)

11. 13. Capacity utilization in Ukraine and world
II. Ukrainian steel sector development
13. Capacity utilization in Ukraine and world
Ukrainian capacity utilization
Source: UPE Co., WSA, OECD
In the context of current changes in the global steel market, Ukrainian export-oriented metallurgy is significantly behind the world level of capacity utilization

12. 15. Ukrainian steel export to EU27
II. Ukrainian steel sector development
15. Ukrainian steel export to EU27
mln. tonnes
Structure by products in 2010
Source: State Statistics Committee of Ukraine, UPE Co.
For 7 months 2010, Ukrainian steel export to EU27 is 3.3 Mt and it assumes a recovery to pre-crisis level in annualized terms. As in past years, the basis of Ukrainian export EU 27 are semi-finished products, which share is 64%

13. 17. Steel consumption in Ukraine
II. Ukrainian steel sector
17. Steel consumption in Ukraine
mln. tonnes
* estimation
Source: UPE Co.
Despite the strong preconditions for the development, domestic steel market of Ukraine remains weak. Under the influence of economic stress in steel consumption in Ukraine fell down to 6.2 Mt or 45% less than in 2007

14. 19. Investments in Ukrainian steel sector
II. Ukrainian steel sector development
19. Investments in Ukrainian steel sector
Annual requirement according to world practice
mln. $
Source: UPE Co.
Investments in modernization of operating productions in Ukraine has decreased to 12$/t in compared to 49 $/t in It is less than worldwide average $/t.

15. II. Ukrainian steel sector development
Now after 2 years of crisis, its impact on the steel industry of Ukraine still remains very essential

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