During the 2nd SteelOrbis Turkish Steel Market Conference, which took place in Istanbul on June 1, Evraz Group's Mr. Georgy Eliseev gave a brief insider's view of the steel industry in the CIS countries.
During his presentation, Mr. Eliseev stressed that Russia, as the largest finished steel producer in the CIS, in 2006 accounted for a 56.3 percent share in the CIS's overall finished steel production of 81.7 million metric tons. The second largest CIS steel producer in 2006 was Ukraine, which produced 29.4 million metric tons of finished steel products, thus accounting for 35.9 percent of the total CIS figure.
Mr. Eliseev pointed out that to date the highest historical annual growth in CIS steel production and consumption was registered in 2006, and could be explained by the construction boom in the region. However, he pointed out that at present the construction boom was evident at a high level only in Russia and partially in Ukraine, while the other CIS states such as Kazakhstan and Azerbaijan were only starting to show the first signs of domestic construction booms.
Speaking about the Russian domestic market, Mr. Eliseev said that in 2006 domestic finished steel consumption increased to 35.6 million metric tons from 29.9 million in 2005, while steel used in construction and pipes accounted for 50 percent of the 2006 consumption figure. Meanwhile, the share of imports in Russian domestic finished steel consumption has also increased, rising to 17 percent in 2006 from 15 percent in 2005.
Mr. Eliseev also indicated that the majority of Russian domestic steelmakers are currently giving supply priority to the domestic market, relegating exports to the background. For instance, the share of exports in overall Russian finished production decreased from 54 percent in 2005 to 50.4 percent in 2006.
Currently there are about 60 steelmaking private companies in Russia, while 69 percent of all domestic production is shared between the ‘big four' - Evraz, MMK, Severstal and Metalloinvest - which are closely followed by the fifth company, Mechel.
The fast-growing Russian market has entailed investments in the expansion of domestic capacities. Mr. Eliseev identified three main investment areas - 1) plate mills, 2) pipe makers' development of their own steel production facilities, and 3) the establishment of mini-mills in the Black Sea and Azov Sea regions (the latter is mainly due to the construction boom in Russia, while the location of the mills is dictated by scrap availability). As regards Evraz, Mr. Eliseev said that the company was currently developing its vanadium business.
As the major threats to the further development of the Russian steel industry, Mr. Eliseev identified the possible shortage of scrap, increasing production costs due to the depreciation of the domestic currency, and also growing imports (according to MEDT forecasts, in 2009 the volume of imports will match export levels).
Speaking about the Ukrainian domestic market, Mr. Eliseev pointed out that the three main domestic companies account for 58 percent of overall Ukrainian steel production. In 2006, domestic consumption in Ukraine equaled 6.3 million metric tons of finished steel products, while imports accounted for 20 percent. Evraz representative Mr. Eliseev also specified the main problems of the Ukrainian steel industry as shortage of iron ore and coking coal.
Concluding his presentation, Mr. Eliseev spoke about the trends in production methods, stating that Russian domestic producers are currently replacing blast furnaces with EAF and that their volumes are expected to double in three years' time. Meanwhile in Ukraine, the percentage of EAF remains small.