The improving situation in the world steel market and the stabilization of companies' profits have allowed Ukrainian steelmakers to restart their investments projects, which were initiated before the crisis but postponed in late 2008. Meanwhile, the market situation has forced Ukrainian steelmakers to switch their investment priorities from the increase of output towards improvement of production efficiency.
In April-May 2010, the Ukrainian producers will proceed with concrete projects for the modernization of their production facilities, the Kommersant-Ukraine newspaper has reported, citing the Ukrainian association of metal producers Metallurgprom. "The Ukrainian steelmakers have no other alternatives. The lack of modernization will lead in the medium term to the decrease of competitiveness and loss of sales markets," said Metallurgprom, adding that, currently, Ukrainian steelmakers' profitability per one metric ton of steel produced amounts to 3-5 percent; meanwhile, the rate for their Russian counterparts is 10-12 percent, while for European producers it stands at about 25 percent.
"The Ukrainian mining and steelmaking sector has several competitive advantages over other regions, but in order to improve its efficiency about $10-15 billion must be invested in the modernization of companies," Smart Holding CEO Alexey Pertin said.
According to the deputy chairman of the Ukrainian flat steel producer Ilyich Iron and Steel Works of Mariupol (Ilyich), during the next two to three years, the main goal of the domestic producers will be the reduction of production costs, mainly through the switch from the use of natural gas, and the securing of cheaper coal by investing in the expansion of port capacities, which according to the investment company Troika Dialog will allow a reduction of 18-20 percent in the coal price in the domestic market, and will cut the production cost by 10-12 percent.
In 2010, the main investment programs of the Ukrainian steelmakers will be directed towards the construction of pulverized coal injection (PCI) plants, of continuous billet casters, of power plants which operate on blast furnace or coke gas.
The main large-scale projects announced since the beginning of the current year and which are planned to be finalized in the next three to five years are: the construction of oxygen-converter shops to replace the existing open-hearth shops at Zaporizhstal and Ilyich, the installation of a new continuous billet caster and a new ladle furnace at ArcelorMittal Kriviy Rih, the construction of power plants at Alchevsk, Dneprovsky Iron and Steel Works named after F. Dzerzhinsky, and Azovstal, and the construction of PCI plants at the seven largest Ukrainian steelmakers, including Ilyich and Alchevsk which plan commissioning of their PCI plants in 2010.
As Steelorbis previously reported, in 2010 the Ukrainian mining and steel producing company Metinvest Holding plans to invest $500 million in the development of its assets, while ArcelorMittal Kriviy Rih plans to invest more than $200 million in the same year.
