Ukrainian steel industry will face hard times.
Last year, the largest steel company ArcelorMittal recorded a net loss of $ 7.9 billion, writing down the value of $ 4.8 billion assets due to a sharp fall in iron ore prices.
"2015 was very difficult for steelmakers and mining industry in general. Despite the continuing high demand in key customer markets, last year the prices fell sharply because of excessive China production. During the year, we focused on the implementation of a series of measures to reduce costs and adapt business to the tough market conditions, "- said Mr Mittal.
With regard to the metallurgical industry of Ukraine (to which Mittal also has a direct relation), by the end of the last year it has increased the losses (the negative financial result before taxation) - as compared to 2014 - by 31.6% or by UAH 7.5 billion, it means, to 31.2 billion USD.
This was reported in the Association of metallurgical enterprises "Metallurgprom". According to the Association’s data, the net income (revenues) from the sales of steel products for the above indicated period increased by 14%, or by UAH 27.3 billion - as compared to the year 2014 - amounting to 194.5 billion USD.
"At the same time, due to the losses from exchange rate differences (the revaluation of foreign currency borrowings and interest on them) we got the negative financial result before taxation", - is noted in the "Metallurgprom" message.
The situation in the metallurgical market of Ukraine was commented to "Vector News" by the economist, Vice President of Corporate Relations Research Center, Vyacheslav Butko. And his comment, mostly concerning the last week’s acceptance of the introduction of the law on duty on the export of scrap metal (about which many expressed their enthusiasm), as well as the forecast of the further development of Ukrainian metallurgy, was disappointing ...
According to Vyacheslav, "the feasibility of priority of ensuring Ukrainian metallurgical enterprises of ferrous scrap could not be doubted. However, it seems that many people do not understand that the main threat for the Ukrainian steel industry is represented by the on-going in the world third industrial revolution.
It will be characterized by active introduction of additive manufacturing. I recall that the term "additive manufacturing" refers to technology of creating objects by sequential application of layers of material.
The models, produced by the additive method, may be used at any production stage - for prototyping (rapid prototyping) as well as for finished articles themselves (fast production).
Of course, traditional methods of production, such as injection molding, can be cheaper in the production of large batches of polymer products, but additive technologies have significant advantages for small and medium series production. They allow to achieve a higher rate of production and flexibility while changing the range of products, along with a higher efficiency per unit of produced goods.
So, additive production saves up to 90% of the starting material, in contrast to the current subtractive production, by the introduction of metal substitutes in the production process and economical consumption.
And it is this fact - rather than a fall in metal consumption in China, excess world capacities, and a question of scrap metal exports and railway tariffs - which will lead to the bankruptcy of low-productive and technologically backward Ukrainian metallurgical enterprises. Nowadays, the production of steel is a capital-intensive industry with a long investment cycle and wave-like inelastic demand.
High capital intensity, fierce competition and the wave-like demand of steel in the international markets have led morally and materially outdated Ukrainian metallurgical enterprises to the stable low-yield operation circle, which can be easily replaced by an unprofitable work.
I think, that in the medium term this leading national economy sector will face even more difficult time. The horizon of existence of the majority of our businesses, with the exception of the newly built mini-steel plants, is limited to physical wear and tear of their equipment.
And the fact that the discussion about the problems and prospects of the domestic steel industry mainly comes down to issues of liberalization (or, conversely, - tightening) of the scrap metal export and restricting of the growth of railway tariffs, only confirms the probability of my assumptions.
The world is standing at the "breaking point" of the trend of world technological development. But many people in Ukraine refuse to believe it ... "Konstantin Nikolaev
Translated by Maria Kryzhanovska