According to Interpipe, in 2017 Ukraine will become a net-importer of scrap.
The company believes that this year the situation with scrap procurement will further worsen. In 2017 Ukraine will procure 2.9-3.1 million tons of scrap. This is less than what was delivered to local companies in 2016 (3.2 million tons), and much less than the 2017 needs (4 million tons). Thus the expected scrap shortage will reach 1 million tons.
The main factor of the procurement decrease is the thinning of the scrap sources. According to CRU Independent Authority, metal consumption on the local market decreased by 95% compared with the Soviet period that is there is almost no new scrap. And the procurement statistics confirms this. In 2000 Ukraine procured 11 million tons of scrap, in 2010 – 7 million, in 2016 – 3.6 million tons.
Interpipe believes that this year Ukraine will become a net-importer of scrap, when import exceeds export. Metal companies, that have already increased hot-briquetted iron imports and pig iron usage, will now have to import scrap as well. Trial purchases by major manufacturers occurred in late 2016.
Scrap price in 2017 will be higher than the Turkish price. Under the shortages of raw materials metal companies will compete not with scrap exporters but with each other, and this will be the main factor to affect the price. This has already been witnessed in 2016: 8 out of 12 months Ukrainian companies have been paying more for scrap than the Turkish price. In September-December 2016 local price exceeded Turkish price by $35 per ton, or by 28%.
The main event of 2017 from the legislative point of view will be the development of the export duty situation. It is now 30 euro per ton. It expires in September, and after that it will return to 10 euro per ton. Metal companies will strive to increase it to 30 euro again.
Ukrzaliznytsia can also influence the scrap market. According to the calculations, the state company has some 400-450 thousand tons of scrap, which exceeds the monthly consumption in the country. The appearance of such a volume could greatly influence the provision of metal companies with raw materials.
“We are entering the period when there will be less scrap, while the need in it will grow. This is the time when the state has to determine the economical model: either support the manufacture of ready-made products or become the raw materials exporter. The decrease of the duty and the increase in scrap price will result in the worsening of competitive positions of Ukrainian metal companies on export markets. In case the duty is decreased our business could lose some 100 thousand tons of orders in 2017”, Interpipe economy and finances director Denis Morozov said. (Ukrainian metal)