If Ukrzaliznytsia starts exporting scrap via direct contracts, as its management plans, this will not result in a 2-2.5-fold increase in profit.
The maximum margin will amount to $5 per ton.
According to the economist Olexii Kusch, the company does not understand the scrap price forming. He says, on the domestic market all expenses from the moment of scrap sale are born by buyers, that is, Ukrainian plants, while in exports they will have to be born by the seller, that is Ukrzaliznytsia.
“Let’s take, for example, Poland, our closest market. The price of scrap on Ukrainian market is $169 per ton and on Polish – $305 per ton. The difference is considerable, but a Polish customer will not have to take scrap from some place in Ukraine. It will be for Ukrzaliznytsia to deliver it to Poland. This incurs additional expenses (scrap processing, transportation to border, paying duties, reloading, etc.). And they will “eat” $131 per ton. Thus, the Ukrzaliznytsia margin from scrap export to Poland will be $5 per ton. And while selling to other countries, it will be even smaller,” he said. (Ukrainian metal)