Mining & Smelting Enterprises

The extraction and beneficiation of nonferrous metals ores, manufacture of metals and alloys, as well finished products represent the traditional industry of Ukraine, which is mostly connected to the rich raw materials base. Mining and smelting are only a chain in the economic cyclical turnaround. On the one hand, metallurgy provides raw materials for different segments in machine-building and construction; on the other hand, it engages large labour forces, and consumes the products of the fuel and energy industry. This industry turns out a wide product line: iron-ore concentrate, agglomerate and pellets, coke, refractory products, cast iron, steel, rolled ferrous metals, pipes and ferroalloys.

Mining and smelting enterprises of Ukraine are concentrated mainly in the Donbas region and Prydniprovia due to raw materials resources. The industrial facilities in the branch are represented by iron and steel works, mining and processing integrated works, coke-chemical and refractory enterprises, ferroalloy plants and enterprises of nonferrous metallurgy. At present, the mining and smelting complex of Ukraine includes 112 specialized iron and steel works on processing of scrap metal and waste, 35 enterprises of nonferrous metallurgy, 16 iron and steel integrated works, 13 hardware enterprises, 12 pipe plants, 12 ore-mining enterprises, 11 coking plants, and 10 refractory plants.

Today, the following enterprises are the key players of the mining and smelting complex of Ukraine: Metinvest Holding, VAT IIyich Iron & Steel Works of Mariupol, VAT Azovstal Iron and Steel Works, Industrial Union of Donbas Corporation, VAT ArcelorMittal Kryviy Rih, Volnogorskyi Mining and Metallurgical Integrated Works, VAT Irshanskyi Mining and Beneficiation Plant, VAT Pivnichnyi Mining and Beneficiation Plant, VAT Poltavskyi Mining and Beneficiation Plant, etc.

As for the raw materials base of metallurgy, one of the strategic segments is the scrap metal market. In the 1st half of 2009, the total turnover of commodities of secondary metal enterprises reached 300 th tons of scrap, while exports totaled 100 th tons. Evidently, the scrap metal segment is another chain in the full metallurgical cycle. Thus, if a decline in steelmaking volumes is expected, scrap purchases also decrease. At a certain time, a scrap metal surplus of 2 mln tons was observed on the market in connection with economic conditions. Therefore, the market is oversaturated. Moreover, according to experts’ forecasts, the total export volume in 2009 will be 1 mln tons, with a 57% growth rate compared to 2008.

Manufacture of steel and mill products by the Ukrainian metallurgy enterprises in 2006 – 1st half of 2009, th tons

Products	2006	2007	2008	1 half 2009
Steel	2 500	29 000	23 100	13 614
Mill products	2 100	24 500	20 500	8 266

The Ukrainian export of mill products was USD 4.8 bln in the first half of 2009. Traditionally, the main purchasers were Middle East countries, with a total turnover of mill products of around 2,863 th tons; the EU members – 1,426 th tons; the People’s Republic of China - 970 the tons; and the USA - 503 th tons. Furthermore, the export of mill products to the People’s Republic of China has significantly increased compared to 11 th tons for the 1st half of 2008, which was caused by a decline in the Ukrainian production costs, which was lower than the corresponding cost of Chinese production.  

The export share in the total volume of manufactured metallurgical products reached 79% for the 1st half of 2009 compared to 68% for the same period in 2008.

External trade represents the prospective outlook for the mining and smelting complex of Ukraine. A recovery in external trade is expected due to the growth of metals consumption –namely steel – on the world markets. Such a process will be favoured by the industrialization of the economies of developing countries (India, Iran, Brazil and Middle East countries), which are the strategic sales markets for the Ukrainian production. The key factor of the Ukrainian metal products’ competitiveness on the world commodity markets is their relatively low cost. Thus, at present, external trade is among the advantages of the Ukrainian metallurgy; however, export is focused on semi-finished products by structure.   

Figure 1. Manufacture of main iron-ore raw materials, first half of 2009; mln tons

One of the most acute issues for many enterprises of this industry is the attraction of financial resources, since production is quite material- and energy-intensive. The most successful manufacturers enter the international capital markets (IPOs), which allows them to attract funds for the modernization of their industrial assets, as well as attract long-term investment partners and have a range of other competitive advantages.