Crowbar gets jammed up in Ukraine
After the change of power in Ukraine, the potential for serious redistribution of territories in the segment lomozagotovki. To occupy a dominant position in the market targeting the Dnepropetrovsk Interpipe group, and mentally prepared to absorb, and to the exclusion of competitors.
The past year has not been kind to collectors of scrap. A record low volume of billet metal recycling – 5.7 million tons speaks for itself. Customers in the face of domestic metallurgical enterprises and factories were enough tightening to contain domestic prices for scrap. Well, while exports were held back by officials: in the first half of 2013, the quota for export of scrap is not actually opened. In the end, the largest scrap collecting players without exception worked in a minus. For example, Dnipropetrovsk Vtormet received 43.7 million UAH. loss, Odesa Vtormet – 5.3 million UAH. Zaporizhia Vtormet – 3,1 million UAH. etc., the company informed all listed companies had a net profit.
2014 relief industry has brought. Rather, the contrary. The February revolution and the March of aggression drove her even further into the corner. According to the Association Metallurgprom, in January-February metpredpriyatiy was delivered only 530 thousand tons of scrap, which is 9% lower than the same period last year and 12% lower from the estimated balance sheet needs. Secondary stocks of metal in warehouses during February has decreased by 60 thousand tons and as of March 1 amounted to 215 thousand tons. The inhibition of the scrap industry was the simultaneous response to the reduction of steel production and rolled products. However, even a loss of pace won't completely save the domestic market from the shortage of scrap.
According to the head of marketing of GP enterprise Yury Dobrovolsky, if we assume that in the current year domestic needs scrap can be reduced by 20%, while scrap supply can fall even more. March behind last year's speakers is much more serious than it was in February. So, the difference in the supply of scrap to businesses in February 2013 and 2014 amounted to about 90 thousand tons, and in March, estimated will reach 140 thousand tons. The shortage of scrap will remain as scrap in Ukraine continues to suffer from low prices in the regions, explains Yuri Dobrovolsky. – In addition, political instability imposes serious restrictions on the disposal of large objects that are the main source of industrial scrap. As evidence of the persistent current deficit, he cites the January indicators import of 13 tons of scrap and 2 thousand tonnes of DRI (direct reduced iron).
Ukrainian steelmakers have already become accustomed to work with imported raw material. But it is possible that you will have to get used to the new domestic suppliers. Additional shake-up for dray market in the current year may be the redistribution of areas of influence. Some of the major market operators have bad karma, that is marked by close ties with the former top leadership of the country. Ukrmet – current national leader in the collection of scrap metal – belongs to the Deputy of Donetsk city Council Andrey Kiselev, who is a classmate of the son of Viktor Yanukovych. And grown rapidly in recent years, trader – kvv group generally has a separatist roots, as established by the Deputy of the Sevastopol city Council Jevgenijs kazeminy. In the context of these details is quite predictable keen interest in the listed assets by law enforcement agencies and all sorts of right-wing sectors and potential buyers who are not averse to expand its presence in the industry.
Chain letter
More responsive than others to take advantage of newly opened circumstances may the Dnepropetrovsk Interpipe group Viktor Pinchuk, still retains an interest in expanding their own scrap-collecting base. The first peak was in 2011-2012, when the holding is preparing to launch its own electric steel-melting mill Interpipe Steel, fed almost exclusively scrap. To ensure his raw rear Pinchuk refurbish equipment already controlled the Dnepropetrovsk and Lugansk collectors, and also acquired a number of scrap-sites in the regions. According to statements of top managers of Interpipe, for these purposes it was planned to spend about $ 30 million., but how much is invested in fact, not reported.
According the group, its capacity for processing scrap are 1.35 million tons per year. Dray agents of the Interpipe working in 8 regions of the country, mostly under the corporate brand, but there are those that have kept their own name (e.g., Meta or Kharkov Ukrainian metallurgical company (Kyiv). Motor interpalpebral scrap processing business remains Dnipropetrovsk Vtormet. The company did not disclose how much raw material they have collected over the past year, but according to the assessment criteria – about 800 thousand tons. More than 100 thousand tons of scraped satellites. In the all-Ukrainian competition it is not less than 15% of the whole.
Thus, the raw materials are still almost fully enough to ensure Interpipe Steel. Last year it produced 1.03 million tons of finished products, potrebu 1.18 million tons of scrap (plus another 22 thousand tons of DRI). However, in the beginning of the year, the company's management announced new priorities. In January 2014, the operating Director of Interpipe Steel Andrea Michielan said: Now it is important that the production process was organized as efficiently as possible. It was then that the economic performance of the plant will be higher. Our goal is to achieve performance equivalent to an annual production of 1.5 million tons of steel, and processing costs of less than $ 100. per ton of billets. At such statement of a problem the mobilization of additional scrap processing facilities in Ukraine again becomes relevant for Interpipe. However, while the desire of groups don't correlate with reality.
Thus, in January-February 2014, Interpipe Steel reduced the output by 22.6% against the same period of last year (137 thousand tonnes 177 tonnes). This is understandable, because the sales pipe is the key products of Interpipe – is now hampered. In 2013, Ukraine was forced to cut pipe exports to 24% in January-February 2014 volume of pipe production in the country decreased by 12%. On this basis, to previously announced plans to intensify production at Interpipe Steel should be treated critically. If only the company did not have relied more shipment to external customers billet, since isn't with the pipes.
In March Interpipe sent a letter to the Cabinet with reference to severely restrict the export of metallurgical raw materials. In particular, the letter offers to enter licensing of export of scrap metal and to oblige all exporters to obtain appropriate permissions from the territorial divisions of Gosstandart of Ukraine and to ban the export of scrap produced from the disposal of machinery and equipment. The call remains unanswered. But ideologically, he clearly directed against those lomosborshchiki who do not own processing facilities. Initiatives Interpipe aimed at weakening this force in the domestic scrap market.
On the other hand, the letter can be taken as a preventive measure in connection with a possible spring outflow of scrap abroad. According to the Agency Metal-courier, from the beginning of the year the pricing environment in the domestic market was more favourable for the collectors than on the outside. But by mid-March, prices in both segments were close. As a result, the cost of scrap at the port sites Ukraine increased to UAH 1800-2130./tons and in procurement points steelmakers remained in the range of 2185-2230 UAH./tons. This isn't an equal sign, but for sellers of scrap signal is positive. According to the Ministry of industry
Another of the same kind – the recent signing of the Association agreement with the European Union. The document provides for the liberalization of Ukraine's foreign trade, steel scrap including. Provides for a gradual transition to duty-free export of Ukrainian scrap. And prohibition of export, to put it mildly, contrary to the trade policy within the framework of this document, – says the analyst of Ukrainian industrial export examination Yury Dobrovolsky. However, he adds that it is quite possible that Ukraine will retain administrative (indirect) export restrictions on strategic raw materials and Europe will agree to turn a blind eye.