The Ukrainian flat steel producer Ilyich Iron and Steel Works of Mariupol (Ilyich) has said that following the (typical for the time of the year) sharp increase in demand in March and April, and the consequent rise in steel product prices, it is currently facing a lack of about 120,000-140,000 mt of orders, as the demand for steel products has plummeted.
According to Ilyich CEO Vladimir Boyko, the price levels from the previous two months did not reflect real demand for steel products, and was rather the steelmakers'' response to the sharp increase of raw material prices.
According to Mr. Boyko, the current situation at the plant recalls the crisis period in October-November 2008. "Now we have switched again to saving mode and are adjusting our production plans on a daily basis, taking into account the leftover raw materials and the required amount of purchases. No one knows what the reason for the market''s fall is, but it could be the effect of the sharp increase in prices, when during one month steel prices rose by 15-20 percent, while raw materials prices almost doubled."
Despite the lack of orders, currently Ilyich is also facing a shortage of working capital. The unsolved issue of VAT refunds (the Ukrainian state owes Ilyich about UAH 1.7 billion) has affected the plant''s payments to its suppliers. For the last month Ilyich practically did not pay for consumed gas and owes money for supplies of concentrate, iron ore and coke. "Everyone hopes that soon the situation will change, but for now we will work in saving mode, with the production lower than in March and April," Mr. Boyko said.
In order to avoid overproduction, Ukrainian steelmakers, including Ilyich, are forced to reduce their output compared to March and April this year. Ilyich''s output at its sintering plant, as well as at all of its steelmaking facilities, is planned according to the availability of raw materials, iron ore and concentrate. As Mr. Boyko said, "Currently at the plant we have a shortfall of 110,000 mt in orders to load mill 1700 at least at the level of last month, and a shortfall of 40,000 mt in orders for mill 3000."
Ilyich''s blast furnace No. 3 and three of its twelve sintering machines are currently stopped for planned repairs.