Ukrainian metallurgists: The fall in exports to Russia will not be able to be compensated

Kyiv, April 24 (Navigator, Vladimir Mikhailov) – The sharp reduction in exports of products from Ukrainian metallurgical enterprises to Russia cannot be replaced either by exports to the EU or by domestic consumption, representatives of the Ukrainian metallurgical industry believe.

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In the first quarter of 2014, foreign exchange earnings from the export of metallurgical products decreased by 4,5%, including long rolled products by 28,3%. The greatest contribution to the reduction in exports was made by a decrease in supplies to Russia, the volume of which decreased by 31%. These figures were announced by participants in the press conference “Metallurgy of Ukraine – current state and energy efficiency”, held in Kyiv.

This trend does not bring anything good to the Ukrainian metallurgy, since Russia is one of the key markets, accounting for about 12% of total exports. Ukrainian metallurgy in general is very dependent on export supplies, noted Alexander Sheiko, head of the department for analysis of ferrous metallurgy markets at the State Enterprise Gosvneshinform.

In his opinion, although in the first quarter of 2014 there was a slight increase in supplies to Europe and the countries of the Middle East, it will not be possible to compensate for the fall in exports to the CIS and Russia either in the short term or in the longer term, although the total export volumes for all countries in in physical terms remained almost at the level of last year.

Import of metallurgical products to Ukraine for the first quarter of this year. decreased by 12,2% in quantitative terms and by 28,7% in monetary terms, with the reinforcement segment experiencing the greatest drop – 70%, which is associated with a decrease in construction volumes. Imports from Russia decreased by 13% in physical terms and by 40% in monetary terms. According to Alexander Sheiko, such trends will continue until the political situation stabilizes.

Due to the heavy dependence on exports, it will not be possible to compensate for its decline at the expense of the domestic market. The share of exports in the total production of Ukrainian metallurgy has already exceeded 80%, and domestic consumption is still falling, notes Alexander Zrazhevsky. For comparison, in Russia 60% of metallurgy products go to the domestic market.

“Our market is vulnerable, and the reason for this is its unprecedented dependence on the external market. If in Ukraine steel consumption is 160 kg per person, then in Turkey it is 460, notes Alexander Zrazhevsky.

“How did we get to this point of life when the depreciation of our fixed assets has already reached 70-80%. Our housing and communal services alone require up to 8 million tons of steel per year - just to maintain at the current level,” the expert asks.

According to him, in Russia back in 2000 plans for metal consumption were developed for all major industries, which made it possible to properly plan the work of metallurgy and replace imports.

Ukraine also lags behind other countries in the costs of modernizing metallurgical production, notes Alexander Zrazhevsky. So, if in the most developed countries they reach 180 dollars per ton of steel produced, in Russia - 80 dollars per ton, then in Ukraine - only 24,5 - 24,6 dollars per ton.

Alexander Zrazhevsky is skeptical about the possibilities of increasing exports to EU countries. In his opinion, it remains to be seen whether the Ukrainian metallurgy industry will be able to take advantage of the preferences provided under the Association Agreement with the EU.

“First you need to see what these documents include. Who saw what documents the government signs? He will show us these documents, then we will be able to do an analysis and say how this will affect metallurgy and other industries,” he says.

In his opinion, Europe will not give its market to Ukraine just like that. “European industry is underutilized and can easily increase production if demand increases elsewhere. No one gives markets for free. All this talk that Europe will save us is worthless,” the expert believes.