Ministry of Industrial Policy of Ukraine SE UEX

Ministry of Industrial Policy of Ukraine SE UEX Co. Research & Consulting Global Market and Ukrainian Steel Industry in 2013 -2014 Vlasjuk V. S. SE UPE Co. Research & Consulting, Ukraine 75 th Session of the OECD Steel Committee Meeting, Paris, 05 -06 December 2013

1. In 2010 -2013 crude steel production in Ukraine has stabilized in range of 33 -35 million tonnes Crude steel production, Mt Source: State Statistics Service of Ukraine This year crude steel production in Ukraine will increase by 0. 3 Mt (+0. 9% y-to-y) to 33. 3 Mt due to export growth

2. Ukraine remains in the top 10 world largest steel producers Ukraine Source: WSA, State Statistics Service of Ukraine By the results of 10 months 2013 Ukraine holds 10 th place (with share 2. 1% from the world production) in the rating of the largest steel-producing countries

3. Iron ore production in Ukraine has steady increased since 2010, but coke production has downtrend in 2012 -2013 Iron ore, Mt Coke, Mt Source: State Statistics Service of Ukraine The growth of iron ore production in Ukraine 2010 -2013 was caused mainly by increase of exports to China (17. 5 Mt in 2013). In contrary, the current production of coke fell to level 2009

4. Structure of Ukrainian steel capacity by process Ukrainian steel capacities by process, Mt Source: State Statistics Service of Ukraine During 2011 -2013 5. 5 Mt of open-hearth furnaces were decommissioned whereas EAF (1. 3 Mt) were commissioned. Complete replacement of open hearth technology in Ukraine is planned till 2018

5. Current Ukrainian steel capacity utilization corresponds to the world average level Ukrainian Capacity utilization (%) Mt Source: State Statistics Service of Ukraine Source: WSA, OECD, UPE Co. During 2013 crude steel capacity in Ukraine was utilized at 76. 1%

6. Ukrainian export continues to play an important role. However, in 2009 -2013 it was significantly below pre-crisis level Ukrainian steel exports, Mt estimation based on 10 months 2013 Source: State Statistics Service of Ukraine After record 2007, in 2009 -2013 Ukraine’s steel export reduced by 5. 2 Mt, especially to America, Turkey, Middle East and Asia

7. Ukrainian export market is well diversified. EU and CIS remain the biggest partners Regional structure Ukrainian steel export Source: State Statistics Service of Ukraine The shares of the EU and the CIS in the structure of exports from Ukraine are 27% and 20% in 2013

8. Outlook 2014: GDP, industrial production, construction will rise moderately … GDP % Source: State Statistics Service of Ukraine Industrial production % Construction %

9. …as a result Ukrainian steel consumption 2014 will increase Steel products, Mt total consumption import Source: State Statistics Service of Ukraine, UEX Co. (forecast), The expected growth rate of apparent steel consumption is 3. 5% in 2014 after reduction by 5. 8% in 2013. This year Ukraine will import up to 1. 78 Mt of steel products or 22. 8% of total consumption. In 2014 steel import to Ukraine is expected nearly 1. 7 Mt

10. Crude steel production in Ukraine in 2014 will grow … … but it still remains far below record 2007 Mt Source: State Statistics Service of Ukraine (fact), UEX Co. (forecast) Expected growth of steel production in 2014 was 2. 7% versus 0. 9% in the current year. It will be determined by the growth of exports (+0. 5 Mt) and domestic consumption (+0. 3 Mt)

Investments in energy efficiency and environment protection

12. In 2011 -2013 modernization of Ukraine's steel industry has accelerated Ukrainian steel production by process Source: State Statistics Service of Ukraine The share of steel production by energy-intensive open-hearth technology in Ukraine has decreased by more than twice from 44. 2% (2007) to 19. 2% (2013)

13. Implementation of pulverized coal injection technology in Ukraine has advanced substantially Structure of pig iron production by usage coke, natural gas and pulverized coal Source: State Statistics Service of Ukraine In 2010 -2013 PCI technology was implemented in four Ukrainian iron&steel works – Alchevsk ISW, Zaporozhstal ISW and Mariupol Ilyich ISW

14. Implementing PCI has led to a decrease in consumption of natural gas per 1 tonne of pig iron in Ukraine Natural gas consumption in Ukrainian metallurgy, million m 3 Natural gas consumption per 1 t pig iron, m 3/t Source: Metallurgprom Compared with 2008, the consumption of natural gas per 1 t pig iron production decreased from 81. 3 m 3 to 23. 6 m 3 in 2013

15. Due to the closures of obsolete steel capacities in Ukraine, steel sector have decreased CO 2 emissions in steel sector, Mt CO 2 emission per 1 t steel production, t Source: State Statistics Service of Ukraine, Metallurgprom, UEX Closure of open-hearth furnaces Donetsksteel (2012) – 0. 99 Mt, Azovstal ISW (2012) – 3. 15 Mt, Nizhnedneprovskii TRP (2012) – 0. 78 Mt Closure of coke battaries Azovstal ISW (2012), sinter plant Azovstal ISW (2013)