This year is remarkable not only for its abnormal heat but also for reformatting of Ukrainian mining and metal industry.
Already by early summer it was clear there are definite zones of interests referred to the three largest groups. Transnational giant ArcelorMittal owning Kryvy Rih Steel, the largest steelmaking asset in Ukraine, takes an important position in Ukrainian industry. However, there are some problems there as well. Steel production was cut by 33% to 77.5M tons last year. As the management of Ukrainian branch says, Kryvy Rih was supported in account of capacities in other parts of the world. Nevertheless, ArcelorMittal is not likely to abandon its Ukrainian asset and believes in return of VAT owed by the government, which reached the amount of three years’ expenses for social development programs of the company – the administration offers us such a tricky comparison. They have the largest amount of VAT return owed by the government. Logic of the government is quite clear: it’s easier for them to stay aswim rather than for other steel companies which have no one to rely on.
The second dominating force in Ukrainian steel industry is “generalized" Russian business which representatives except Evraz are even not disclosed. Somebody acquires a half of ISD, later acquires Zaporozhstal, but does not disclose its name. And its quite possible it could be different companies. Anyway, it’s turned clear that with coming of new government in Ukraine, Russian business has become more active there. It seems they considered political risks are not actual any more. At least new power is not to prevent Russian investors, and they feel themselves freer in Ukrainian market. And the facts are confirming that, and not only in steel industry.
And finally the third but not the least player in Ukrainian steel industry is Metinvest holding owned by the richest person of Ukraine, Rinat Akhmetov. And it is quite natural, moreover, it even seemed to be strange if he didn’t use new political situation in the country which is favorable for him now, to acquire Ilyich Steel and Zaporozhstal. But for Zaporozhstal Russian competitors offered higher bid in the very last moment, and he has claimed to London Arbitration court for compensation of violation of preliminary agreement with Zaporozhstal owners.
Today Metinvest is obvious leader in Ukrainian mining and steel industry and an essential player in international metallurgical market. The group has produced 9.6M tons of coking coal, 4.1M tons of coke, 17.6M tons of iron ore concentrate, 11.6M tons of iron ore pellets, smelted 7M tons of steel and produced 9.2M tons of steel products in 2009. And this is in crisis year. But the group’s capacities are even larger, and this year with merger of Ilyich Steel the capacities increased by 7M tpy of steel plus a number of auxiliary capacities and infrastructure. Experts say Metinvest to produce 14-15M tons of steel in 2010 and simultaneously to remain one of the largest supplier of steelmaking raw materials in local market and for export.
Anyway all those mergers, acquisitions and reorganizations have at least one positive effect for Ukrainian steel industry: the most sufficient steel assets of Ukraine were actually saved from perspective bankruptcy. The process is not complete and we will probably see new mergers and acquisitions but there is no threat of steel companies closure any more. New owners are looking for expansion and development.