Global Steel Trade; Structural Problems and Future Solutions

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Ukraine’s Big Four More than half of Ukraine’s total annual crude steel productive capacity is concentrated in its four largest integrated steel mills. Kryvorizhstal has annual capacity of 10.6 million MT, or almost one-fifth of Ukraine’s total steel capacity; Mariupol’s annual capacity is 7.2 million MT; Azovstal’s annual capacity is 7 million MT; and Zaporozhstal’s annual capacity is 4.8 million MT. 86 Some Advantages These mills benefit from a number of historic advantages that have helped the industry maintain a respectable presence. The steel industry’s raw material sources are well developed, and many mines are close to the steel mills themselves. Ukraine is rich in iron ore deposits and other critical raw steelmaking materials. 87 Ukraine’s largest mills are well-positioned for export, with easy access to the Black Sea. 88 And Ukrainian steel workers are well-trained, and the country’s labor rates are low. 89 Role of Exports Steel exports now account for 40 percent of the country’s exports and hard currency earnings. 90 In the last few years, Ukraine has exported well over 60 percent of total finished steel output. With the exception of Russia, Ukraine now ranks as the largest steel exporter among the former Soviet Republics. There is little doubt that the Ukrainian government will continue to give steel exports a key role in Ukraine’s economic development and will look to exports as a vehicle for generating badly needed hard currency. Exports of finished steel products peaked in 1997 at 12.1 million MT before slipping back slightly to 11.9 million MT in 1998 as a result of trade actions against Ukraine. 91 Ukraine’s flatrolled steel exports have increased significantly and totaled nearly 14 million MT during the period 1997–1998. Ukraine’s exports largely consist of hot-rolled steel and semi-finished products (Chart 6-6), the bulk of which are exported to Asia and the Near East. 92 Ukraine’s largest customers for hot- and coldrolled steel include China and Turkey (Charts 6-7 and 6-8) and for wire rod, they include China, Turkey, and Russia. Declining Domestic Consumption and Exports to Russia Metric Tons (millions) 8 7 6 5 4 3 2 1 Coated Sheet Cold-Rolled Sheet Sections Semifinished Hot-Rolled Sheet 0 1995 1996 1997 1998 1999 Source: Metal Bulletin Research and Infomine. 6-6. Ukrainian Steel Exports by Main Product Group (1995–1999) The Ukrainian government’s heightened attention to exports has been driven by a dramatic drop in domestic consumption and the collapse of demand from its most important foreign customer, Russia. Wire Rod Other Rods 156 Global Steel Trade: Structural Problems and Future Solutions
Domestic Consumption In 1998, Ukraine’s apparent steel consumption was a mere China 31 percent of its 1992 level, Other 22.6% having declined most 39.2% significantly between 1995 and 1998. 93 This decline, coupled with a corresponding drop in 14.1% Turkey Russian demand for Ukrainian steel, led Ukraine’s steel 7.1% industry to look globally for Taiwan United States new markets. 94 To some extent, 3.5% Russia Belarus increased trade is part of the Syria 5.3% 3.6% broader process of economic 4.6% transformation. Expanding Source: Metal Bulletin Research and Infomine. export markets is important for Ukraine’s steel industry. 6-7. 1998 Hot-Rolled Steel Exports by Destination, Ukraine Ukraine’s domestic consumption of rolled steel fell from 7.5 million MT in 1995 to just 3 million MT in 1999. China The decline in domestic steel consumption was prompted by Other a severe downturn in the Ukrainian economy, which 39.9% 24.5% was mirrored throughout the former Soviet Union. Since 1991, Ukraine has been in a protracted economic slump, and stagnating reform efforts 20.0% Turkey have worsened the situation. Russia Although considerable 4.0% progress has been made in Syria Algeria 5.9% recent years, Ukrainian 5.7% economic reforms lag behind Source: Metal Bulletin Research and Infomine. other countries transforming their economies. The private 6-8. 1998 Cold-Rolled Steel Exports by Destination, Ukraine sector remains in an embryonic form, except for some notable exceptions. 95 The 1998 Russia crisis exacerbated an already strained economic situation and damaged Ukraine’s traditional export markets. The Russia crisis, Ukraine’s economic over reliance on Russia, and stagnating domestic reforms made the situation worse, leading to a further decline in the country’s GDP and a 35 percent nominal depreciation of the Ukrainian currency, the hryvna. 96,97,98 Russian Trade Ukraine’s steel sector had always been able to rely on Russia as an outlet. Historically, Ukrainian steel mills were a primary raw material source for the Soviet Union’s tanks, machines and construction projects. Chapter 6: New Players in the Global Market—Ukraine 157
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Preface This report is the product
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Contents Preface ..................
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CHAPTER 1 Overview Introduction Ove
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steel prices and still make money (
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History of Steel Trade Friction The
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• Led by “mini-mill” companie
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New Players in the Global Steel Mar
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CHAPTER 2 The U.S. Steel Import Cri
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The Steel Workers’ Perspective on
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1997: A Cloud Behind Every Silver L
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These productivity increases and sh
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In mid-1998, financial crisis hit R
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concerns regarding purchase allocat
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percent from Korea, and 59 percent
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from Brazil, Japan, and Russia. 58
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finished steel prices is very compl
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Department of Commerce determined t
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The Role of Trading Companies Tradi
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Trading companies viewed these atyp
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Weirton, W.V.: A Community Unites i
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CHAPTER 3 Behind the Crisis Introdu
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Competition has been restrained by
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When the Asian economic crisis sapp
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The Russian steel industry has made
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steel is traded between the world
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estructuring of companies and predi
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Under the conditions of introducing
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When prices began to escalate after
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pension payments) reached almost 20
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exports extremely profitable, the b
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Trading Companies and the Marketing
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these intermediaries, one source es
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• Domestic demand for hotrolled s
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Although the production facilities
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3.2 Structural Factors and Japanese
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apparent in the marked differences
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High Domestic Prices The apparent c
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outstripped growth in domestic dema
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Noncompetitive Domestic Market and
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Professor Tilton’s price analysis
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The Product Certification System Ad
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Three factors contributed to tippin
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Collapse of Asian Export Markets At
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at a loss. The rationale for pricin
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3.3 Korea’s Steel Industry in The
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negotiations for the purchase of Ha
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almost 700 percent (Chart 3-31). By
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of 1997 and 1998, when capacity uti
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• Regulating POSCO after privatiz
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approximately 32 percent from 1997
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denominated revenue. For other mini
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Rounding Out the Big Three Usiminas
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Chapter 3: Behind the Crisis—Braz
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Import Licensing System Importers m
Page 111 and 112: they were able to cut their prices,
Page 113 and 114: CHAPTER 4 U.S. Response to the Cris
Page 115 and 116: compared to November 1998 and conti
Page 117 and 118: downstream products. The U.S. indus
Page 119 and 120: for by the WTO. The industry argues
Page 121 and 122: Effect of Excess Inventories Much o
Page 123 and 124: coke but also to the large increase
Page 125 and 126: The Role of the Chinese Coke Indust
Page 127 and 128: CHAPTER 5 Reforms and Restructuring
Page 129 and 130: The current dramatic economic and s
Page 131 and 132: While this analysis is largely corr
Page 133 and 134: these four heavyweights will be abl
Page 135 and 136: Government Initiatives to Encourage
Page 137 and 138: U.S. Firm Takes Over Hanbo Steel Pr
Page 139 and 140: ensure that the commercial banks fo
Page 141 and 142: Again, while these efforts hold pro
Page 143 and 144: Brazil-IMF Reform Program Throughou
Page 145 and 146: CHAPTER 6 New Players in the Global
Page 147 and 148: • Be subject to strong subsidy di
Page 149 and 150: Technological Backwardness. China
Page 151 and 152: 100 kg at present. Per capita consu
Page 153 and 154: Current Reform Efforts in the State
Page 155 and 156: wire rod production with an annual
Page 157 and 158: Notwithstanding the negative impact
Page 159 and 160: Media reports and interviews with v
Page 161: Baoshan is not equipped to provide
Page 165 and 166: two firms, Enakievo and Konstantino
Page 167 and 168: • Barter. Ukrainian steel compani
Page 169 and 170: Today India is the world’s tenth
Page 171 and 172: among steel-intensive sectors, such
Page 173 and 174: Banks’ Debt and Equity Exposure D
Page 175 and 176: Tariffs. High tariff rates also con
Page 177 and 178: new sales growth. 196 By 1998, even
Page 179 and 180: CHAPTER 7 Avoiding Future Crises In
Page 181 and 182: propose to monitor additional data
Page 183 and 184: determination of dumping. In Octobe
Page 185 and 186: Engaging Korea On Hanbo In late 199
Page 187 and 188: Korea Korea’s steel industry has
Page 189 and 190: New Players: China, Ukraine, and In
Page 191 and 192: government and private sector assis
Page 193 and 194: Notes Chapter 1 1. Difference of av
Page 195 and 196: massive layoff data shows 9,550 emp
Page 197 and 198: also possess weaknesses, which the
Page 199 and 200: 64. Ibid., 145-177. 65. Id. Bethleh
Page 201 and 202: ITC considered numerous factors. On
Page 203 and 204: 104. Harry Thuedaus was recently re
Page 205 and 206: Frank Markus, Successes and Failure
Page 207 and 208: Decrepit Steel Plant in the Urals,
Page 209 and 210: 2. WTO. At the time of this report,
Page 211 and 212: Among those who have written on thi
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line pipe markets, the European and
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97. Merrill Lynch, “Steel Industr
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chaebol to downside risk. This crea
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provided after 1991 by domestic ban
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61. Catholic University of Korea Pr
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acquired on economically viable ter
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date of publication in printed vers
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Producers of iron ore and coke, the
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production may be shut down by the
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56. U.S. government sources. 57.
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79. World Bank-Korea, 12. 80. Seong
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24. 24. “Hard Times for China’s
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60. “PRC To Further Cut Steel Out
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132. In terms of crude steel produc
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195. The capacity of the new steel
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