CIS raw materials Pupchenko

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Analysis of the CIS Raw Materials SteelOrbis Spring‘ 06 “Steel in the Raw“ Conference & 54th IREPAS Meeting Andrey Pupchenko, Head of Raw Materials Research, Metal Expert Research Group, Ukraine

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The main points of the presentation  The main focus is on ferrous scrap Steel sector influence on raw materials Forecasts of ferrous scrap consumption and export

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The main focus is on ferrous scrap

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World ferrous scrap deliveries Source: International Steel Statistical Bureau The main focus is on ferrous scrap

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‘000 tonnes Ukrainian scrap collection decreased in 2005 by 2.2m tonnes vs 2001 figure… The main focus is on ferrous scrap

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‘000 tonnes …whereas consumption in the domestic market increased by 1m tonnes The main focus is on ferrous scrap

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The main focus is on ferrous scrap Domestic market prevail in Ukrainian scrap deliveries 2004 2005

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Correspondingly, export of ferrous scrap from Ukraine decreased substantially ‘000 tonnes The main focus is on ferrous scrap

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The main focus is on ferrous scrap Strategical points of the Ukrainian ferrous scrap industry Obsolete scrap reserves run out A significant consolidation of the market operators took place in Ukraine in 2004-2005 The market is still under the restrictions adopted by government

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The main focus is on ferrous scrap Ferrous scrap collection in Russia almost stabilized in 2005… ‘000 tonnes

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The main focus is on ferrous scrap …although deliveries into Russian domestic market is still growing ‘000 tonnes

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2004 2005 The main focus is on ferrous scrap The share of domestic market in scrap deliveries have increased in Russia

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Will huge ferrous scrap export from Russia be sustained? ‘000 tonnes The main focus is on ferrous scrap

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The main focus is on ferrous scrap Strategical points of the Russian ferrous scrap industry the industry still has a great potential the structure of scrap export from Russia is rather diversified moderate export duties (EUR15 or 15%)

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The future export flows of ferrous scrap from Russia and Ukraine will be defined by: domestic market situation dynamics of world scrap prices

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Steel sector influence on raw materials Steel export prices - which way to follow: up or down?

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Steel sector influence on raw materials surplus of the steelmaking capacities in the world market weakening influence of “raw materials factor” upon pricing due to increase in supplies of raw materials reduction of steel output (and, consequently, the consumption of raw materials) in such regions as EU-25 and North America Turning point in steel industry – prices to go down

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Steel sector influence on raw materials Consequences prices in the world market of steel products will be preserved in a medium-term perspective at a current, relatively low, level steelmakers will start to compete by reducing production costs Likely bankruptcies of non-competitive producers will result in partial suspension of production facilities further consolidation of buyers of raw materials, i.e. their negotiating positions will be strengthening a growing number of anti-dumping investigations will result in lower export supplies, including those from CIS Turning point in steel industry – prices to go down

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Steel sector influence on raw materials Will CIS steelmakers continue their growth even at descending world market? Are they competitive enough? What route will be chosen: pig iron or electrometallurgy?

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Steel sector influence on raw materials Semi-finished steel production cost, $ per tonne EXW Source: Metal Expert Research, WSD

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Steel sector influence on raw materials The main competitive advantages of Russian steelworks high quality of raw materials – both coking coals and iron ore in comparison with Ukrainian sufficient investments that have been made by the majority of Russian steelmaking enterprises during recent 5 years - the growth of continue casting share - open hearth furnace replacement The share of steel products deliveries into domestic market is growing

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Forecasts of ferrous scrap consumption and export

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Forecasts of scrap consumption and export low production costs plans of steelmakers and a number of new projects of mini-mills replacement of open-hearth production will restrain the growth of steel output in Russia Russia Raw materials consumption – growth or stabilization?

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Forecasts of scrap consumption and export Raw materials consumption – growth or stabilization? Steel production is to increase… …ferrous scrap consumption is to grow Russia: 2004-2007

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Estimation of ferrous scrap consumption growth in Russia, million tonnes Forecasts of scrap consumption and export Estimation: Metal Expert Research

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Forecasts of scrap consumption and export Estimation of ferrous scrap export from Russia, ‘000 tonnes

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Forecasts of scrap consumption and export Ukraine High production costs A lack of preconditions for more investments in the enhancement of production capacities A need to replace open-hearth production facilities with BOFs Raw materials consumption – growth or stabilization?

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Forecasts of scrap consumption and export Ukraine: 2004-2007 Steel production to remain stable… Raw materials consumption – growth or stabilization? …whereas collection is to decrease

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Forecasts of scrap consumption and export Estimation of ferrous scrap export from Ukraine, ‘000 tonnes

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Ferrous scrap availability from CIS countries to decrease substantially in two years period

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Starting from March 2006, CIS Raw Materials Monthly subscription package includes more extensive information on scrap market - Ferrous Scrap Market Forecast (updated every 10 days)

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Thank you very much for your attention andrey@metalcourier.com