In June Ukraine reduced steel smelting by 13.5% compared to May to 2.46 M tons, finished products reduced by 24.1% to 2.15 M tons – reported by Metallurgprom (Ukrainian steelmakers’ federation). Thus, in H1 Ukraine produced 16.34 M tons of steel which is 17.9% more than the same period last year, finished products – 14.53 M tons (+16.6%).
Decrease in steel melting goes on the second month already. The most decrease of production have shown the still mills of ISD holding: DMKD -86.2% and Alchevsk Steel -70.8%. The best results has Zaporozhstal, which reduced steel melting by 1.36% only. Deputy Chairman of the Board Alexander Putnoki notices that in June there are 30 days and in May there are 31, so he can say the mill succeeded to keep its daily average steel melting. It happened in account of the orders came from the recent month.
By words of Sergey Matviyenkov, Deputy Chairman of the Board of Ilyich Steel the main reason for drop in production is correction of prices in global market. In April – early-May it was dramatic growth of steel prices first because of iron ore price increase by 90-100% and then it was abrupt fall of the metal price till the end-June. “Traders who managed to fill up their stocks in April have taken waiting position what led to recession of demand” – says Vyacheslav Popov, Deputy Head of Mining and Metallurgical Department of DZI (government expertise authority for international markets).For DMKD and Alchevsk Steel unfavorable market situation was deepened by problems with natural gas and raw materials supplies, notices Ivan Dzvinks, analyst at Eavex Capital. In June the enterprices of ISD were at the edge of stop because of their indebtedness to Naftogaz Ukrayiny (State monopolist supplier of oil and gas). In particular, natural gas pressure to DMKD was reduced three times and all its blast furnaces were transferred to gas-free regime.Sergey Gayda, analyst at Dragon Capital beliefs that there will be no further fall of metal production in Ukraine in summer month. “Lower prices and reduction of stocks at traders will return buyers to the market” – he says. Vyacheslav Popov agrees with him: “In July consumers in the Middle East which is the major sales region for Ukrainian steel are in the threshold of Ramadan and are going to try to replenish their stocks”. Mr. Putnoki is not sure the prices to go up: “There was price fall, and there is and will be.”