February 9, 2012 German Businessmen Commend Investment Improvement in Ukraine February 8, 2012 Yalta Mountain Forest Reserve


	2012 February January 2011 2010 2009 2008 2007 1996



	Featured Stories German Businessmen Commend Investment Improvement in Ukraine Yalta Mountain Forest Reserve Ukraine Enhances Efforts to Diversify Its Energy Sector



	Featured Photos Winter Wonderland in Kyiv Mamaieva Sloboda Ukrainian Christmas



	Featured Videos A Charitable Marathon in Lviv Lviv Arena Chrysanthemums in Kyiv



	Tags investment Ukraine steel industry economy Kuwait shipping Crimea vacation politics trade services real estate partnership UAE grain FDI agriculture diplomatic relations industry export EBRD lending IMF cooperation Qatar grain quotas Energy Community tourism WTO niter cargo grain export reforms taxation Jordan Libya grain harvest oil gas NAK Naftogas visa car industry transportation wheat other Saudi Arabia stock market barley weapon gas transport system education import Bahrain Euro-2012 sugar industry World Economic Forum aircraft building metallurgy oil industry Syria carbamide natural gas insurance investing climate vehicles air transport Koran conference winter crops turnover banking sector building sector precious metals jewelry rye land market grain market Communications Market infrastructure election livestock World Bank finance metal soybean coal industry sunseed sunoil mining industry alternative energy Oman cast iron Odessa money nuclear energy Swallow's Nest harvest Kamianets-Podilskiy Fitch credit ratings Kazantip Sofia Park nature Pyrohovo museum Koktebel festival coal Lviv sonflower oil grain sector renewable energy business climate steel energy museums places of interest gas production winter Kyiv Yalta

Ukraine’s steel industry shows first signs of recovery

August 12, 2009

June-July production figures for the domestic steel industry suggest that the sector has bottomed out. Moreover, there have been positive changes that make it possible to talk about the start of a revival of steel markets.

Problems in a domestic industry that constitutes nearly 7% of Ukraine’s GDP, 10% of gross output of goods and services, 22% of overall industrial output, and 40% of the country’s exports have been the key factor driving the domestic economic crisis.

In recent months, however, the steel industry has shown a steady growing trend for the first time. This makes it possible to state that the bottom has been reached and the sector is slowly recovering.

Given its dependence on external factors, the domestic metals industry tends to clearly follow global trends. Worldwide, the steel industry is currently in very bad shape. However, the 80% decline in output from peak production numbers appears to be the bottom.

Still, not all countries have suffered equally. Steel production figures for Ukraine have been somewhat better than in developed economies, but lower than among its main competitors.

Over the last six years, steel output has increased by nearly 490 million tonnes, around 60%. This pace of growth was last seen in the post-war period when the world economy was recovering. Since that time, metals markets were growing at a modest pace, no more than 5-7% at their peak.

For Ukraine, North African and Middle Eastern markets are particularly important. Over the last three years, the price for oil has more than tripled and stayed at US $140/bbl for a long time. This resulted in colossal inflows of hard currency in these regions.

Because of the crisis, profitability fell from 18% to -9% among steel companies during H1’09, considerably affecting their financial positions.

Overall, June-July production figures for the sector suggest that metallurgy has bottomed out. Moreover, the positive changes noted here make it possible to talk about the start of a revival of steel markets.

Two main factors form the basis for positive trends in the next while:

Firstly, oil prices have stopped falling. At the moment, the price of petroleum is around US $60/bbl. This is 20-30% less than the indicators set in the budgets of OPEC countries and Russia, but better than the more pessimistic forecasts.

Because of this, construction plans in these countries have been frozen to a much lesser degree than was anticipated at the start of 2009. Analysts from North Africa and the Middle East are now talking about 15-40% of projects being stopped, which is relatively not so much.

Moreover, the world’s biggest steel consumer, China, has started to spend a stimulus package worth US $600 billion to develop infrastructure. This is fairly good news for steel markets.

Secondly, it is highly likely that as car production picks up in the fall, prices for sheet metal should rise. Ukrainian manufacturers have confirmed this hypothesis.

Compared to other countries, the domestic steel industry is looking pretty good. Still, the strength of these positive trends will be tested over the next two months.

At the moment, it can be stated that steel output has stabilized in Ukraine at 60% of pre-crisis volumes. Still, these positive factors are external in origin, while internal reserves of support for the sector have not kicked in. This offers Ukraine’s Government some room to maneuver.

Tags: economy, steel industry