Experts analyze the state of the steel markets in 2011 and make predictions for next year.
About the end of the reporting period indicate not only the numbers in the calendar, but also changes in the dynamics of sales. There is reason to believe that the fall recession ends and there will be soon stabilized. Although full recovery is still far away markets, Steelworkers for some time will be able to forget about depression.
 
Global trends
Center enterprise called the main reason for the fall of the weakening global steel market, the crisis in Europe. During the three months of autumn, rental rates fell to $ 90-100 per tonne and is now almost minimal, said last week the Director of the center Vladimir Vlasyuk. He cited examples of price reductions: square billet on FOB Black sea fell from 675 dollars per ton in mid-September to 575 dollars per ton; hot rolled coil has fallen even more — from 700 up to 565 dollars per ton on the same conditions.
“However, real consumption has decreased not very much, and in December intensified the warehouse. Therefore, we believe that in the first quarter of 2012, prices stabiliziruemost and will increase slightly, partially offsetting the decline in the autumn”, says Vlasyuk. In his opinion, the average price of billet on FOB basis in this year will amount to 632 dollars per ton, in 2012 — 605 dollars per ton, the average cost of hot-rolled coil on the same terms respectively 670 and $ 645 per ton. Thus, the head of “Ukrpromvneshekspertizy” in the coming year expects to continue reducing the cost of hire is on average 20-25 dollars per ton.
Head of the analytical project “of Delfika” Alexander Krainikov expects that in 2011 the world will be produced 1510 million tons of steel, which is 93 million tons, or 6.6% more than in 2010. In China, steel production will increase by 66 million tonnes to 692 million tonnes. “The increase was due to the increase of (production) in the European Union, plus 8.4 million tons, North America — plus 7.6 million tons, as well as launching new facilities in Turkey, plus 4.5 million tons, he says. And in 2012, despite the price decline, we expect growth of production by 3.6% to 1564 million tons. In China steel output to reach 728 million tonnes.” Incentive will be an increase in 2012 global GDP by an average of 2.8%, and industrial output will grow by 3.8%. In the European Union economy will grow 0.2% in the US by 2%, while in China growth will slow to 8.4% (2011: 9.5 percent).
Krainik fears that excess steelmaking capacity in low demand on the world market again will result in overproduction and lower prices. Harder to keep a reasonable download of the major production facilities for the crisis period it declined from 83.1% to in 2007 to 75.4% in the current year. “At the same time on the background of General market decline reduced the prices of raw materials and, thus, the cost of steel. In particular, iron ore raw materials (IORM) in 2012 will drop 8.2% on quarterly contracts and by 3.6% on spot to average $ 157 per tonne (2011: 171 dollar per tonne) for iron ore of Vale Carajas fines (CJF) with a content of 66% iron FOB Brazil,” the expert predicts.
Coking coal quarterly contract next year will drop by about 20% and on average will cost $ 230 per ton FOB Australia (2011 — $ 289 per ton). But steel scrap, on the contrary, due to the limited offerings of the major suppliers from the CIS and the European Union will rise by 2-5% up to $ 450 per tonne for HMS 1&2 (80:20 mix) FOB Rotterdam (in the current year, the average cost was $ 450 per tonne).
Vlasyuk pessimistic about any significant reduction in the cost of steel products. Because of the expensive raw materials and energy will significantly increase the risks for numerous outdated and inefficient industries, especially those that are not integrated with production of raw materials.
 
Ukrainian prospects
In Ukraine in 2011 also steel production will grow from 32.6 million tons to 34.8 million tons. Vlasyuk recalls that the pre-crisis volumes remain unattainable (in 2007 produced nearly 43 million tons). The current indicators are almost repeated 2002 and 2003: in 2002, the country had produced 34.1 million tonnes of steel in 2003 to 36.9 million tons. The head of “Ukrpromvneshekspertizy” predicts that next year production will recover a further 3.2% to 35.9 million tons.
However, volatility in global consumption does not allow domestic steel producers to steadily develop the industry. Experts point to a significant loss of our country in foreign markets in recent years. So, if in 2007, the country sold abroad more than 28 million tonnes of rolled products in 2010 was sold 23.8 million tons, and by the end of 2011, the exports will decrease to 22.5 million tons.
According Vlasyuk Ukrainian ferrous metal continues to feel the changes caused by the capacity expansion in Turkey, the Middle East and North Africa. “In 2011 relative to 2007, Ukrainian exports to Turkey and to the Balkans fell by 2.7 million tons in Africa by 2.2 million tons to 1.8 million tons, including to CIS countries by 0.9 million tons. However, increased exports to 27 EU countries by 1.8 million tonnes to China by 0.2 million tons to the middle East — 0.1 million tons. Thus, the importance of the EU as a market is very increased,” — said the head of ”Ukrpromvneshekspertizy”.
In the export structure in 2011 continued high share of semi — finished products of 46.7%. Although in the last two years there has been a tendency to decrease: in 2010 it amounted to 48,7%, 2009 — 51,2%. However, the gap is very significant — the share of products in world steel exports does not exceed 15%.
Positive that in 2011, the increase in domestic demand for rolled — up to 7.7 million tons, while a year earlier in the country was consumed only 5.3 million tons. Krainik connects emerging growth with the recovery in machine building (especially the building) and to a certain extent — construction, including the construction of Euro 2012 objects. “However, the domestic market is still only a small part of the hire — about 25%, — the expert reminds. In developed countries the proportion is reversed: 25% is the share of exports. “To raise domestic consumption could be due to the integrated update utility metal reserves. For now, from 571 million tons of the total metal reserves of the country 337 million tons 100% worn out, so Ukrainian ferrous metal has an impressive resource production growth for many years to come,” — said the expert.
As for production costs, it in 2012 decline slightly. Release tons of square billets is cheaper at $ 28 and will be $ 560. It will be primarily due to the decline in prices on the Ukrainian market of iron ore (13%) and coking coal (10%), although the scrap price will rise by about 5%. In 2011 the production costs of one ton of billet increased from $ 470 up to 588$. Vlasyuk believes that cheapened the raw material will allow metallurgists to achieve a profitability of about 5%. However, the margin of foreign steel producers remains much higher in 2011-12 in developed countries it is 10%, in developing — 15%, and in Russia will reach 22-23%. “Our steelmakers will continue to make great efforts to maintain price competitiveness in the export. In this context, the domestic market pinned great hopes” — sums up the expert.
Andrew BARANEC,
www. ukrrudprom.ua
according to the SE "ukrpromvneshekspertiza"