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#2' 2003 print version
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UKRAINE IS READY TO GIVE UP EXCESS PRODUCTION



Vladimir Denisov

The national program of developing the mining-and-metallurgical complex adopted by the government of Ukraine is to run till 2010. It provides for restructuring this sector of the economy so as to make it meet the needs of the domestic and foreign markets. It means liquidating excess capacities and, above all, shutting down outdated production facilities.

A new blank continuous casting machine has been put into operation at the Enakievsky steel mill. The manufacturer is the Novo-Kramatorsk Machine-Building Plant.

A new blank continuous casting machine has been put into operation at the Enakievsky steel mill. The manufacturer is the Novo-Kramatorsk Machine-Building Plant.
A new blank continuous casting machine has been put into operation at the Enakievsky steel mill. The manufacturer is the Novo-Kramatorsk Machine-Building Plant.
M
ost of Ukraine’s steel mills were built in the first half of the last century. So far neither the state nor new owners of enterprises, which were privatized during reforms, managed to implement a full-scale restructuring. According to Ukraine’s Ministry of Industrial Policy, the total wear extent of the steel industry’s basic assets exceeds 60%. As much as 90% of blast furnaces and rolling mills have been in operation longer than they have been designed for. The technological lag is also too big. Almost 50% of steel are melted in open-hearth furnaces and Ukrainian mills have no chance to replace them this current decade. The same is true with the steel casting technology: installation of new continuous casting machines notwithstanding, almost half of steel will still have be cast in moulds till 2010.
As is expected, by 2010 about 8% to 10% of the steel industry’s capacities will be put out of operation. As a result, the production of cast iron, steel and rolled stock will be reduced by 4 million tons, 2.1 million tons and 3.2 million tons accordingly. Vladimir Grischenko, the director of the Ministry’s metallurgy department, believes that the implementation of the national program will make it possible for Ukraine’s mills to produce between 25 and 27 million tons of rolled stock a year. In 2010 the domestic market will need from 10 to 12 million tons of this amount and the rest will be exported.
It should be noted that Ukraine’s distinctive feature is a low level of steel consumption (4.5 million tons in 2002) that seems to be abnormal for a comparatively big country with a well-developed engineering industry. In such a situation on the domestic market its metallurgical complex is doomed to be export-oriented. Foreign sales of principal kinds of metallurgical products bring over 40% of all currency earnings to the state budget. Importers are Russia and other CIS countries as well as China, Turkey, Thailand, Bulgaria and Syria.
Under the planned national program the Ukrainian steel industry will need about $1.5 billion for its development. The state intends to allocate state budget funds to reconstruct enterprises producing deep-mined iron ore. But renovation of steel mills should be carried out with companies’ own funds, bank credits or at the expense of any other sources, which are not forbidden by law. The country’s government plans to introduce into the Ukrainian parliament, the Supreme Rada, a draft law, which will provide for investment tax allowances.

R  E  F  E  R  E  N  C  E

Outdated production capacities determine to a large extent the structure of export shipments by the Ukrainian steel industry. Semi-finished products account for a major part of these shipments. In 2002 export of blanks rose in money terms by 13 % and of cast iron by 49 %. At the same time sales of products with a higher added value went down: shipments of steel reinforcement decreased by 28 %, supplies of section rolled stock declined by 8.3 % and deliveries of alloyed steel rolled stock dropped by 20 %.


By the volume of steel making Ukraine is placed seventh in the world. Its share of world market amounts to 3.9 %. In 2002 the country produced 30 million tons of steel rolled stock.


Putting excess capacities out of operation will result in cutting down jobs. Meanwhile, the situation on Ukraine’s labor market is already tense. Since resources of the state budget are limited, Ukraine is interested in foreign investments for creating new jobs as well as in getting financial support of international organizations to help settle down those workers, who are being laid off. 

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