Modest success in Europe, big losses in the US and Russia

On December 11 in Zaporizhzhia metallurgists discussed in the presence of Serhiy Hryshchenko, deputy state secretary at the Ministry of Industrial Policies, a difficult situation in the wake of worldwide antidumping suits against Ukrainian producers. One of the leading industries in the nation’s economy, metallurgy is responsible for 47% of Ukraine’s foreign currency earnings in foreign trade and 27% of its gross domestic product. Thus the losses inflicted on the Ukrainian export of metal products by countries that see Ukraine as a certain persona non grata could significantly worsen this country’s rosy macro-indices as well as the people’s living standards.

This week the US International Trade Commission (ITC) is sending President George W. Bush a detailed report containing demands to impose protective measures and concrete proposals against the import of steel by the US. The commission suggested the Friday before last that prohibitive duties from eight to 40% be imposed for a period of four years. Three of the six commission members, including the chairman, advised imposing a 20% duty, subject to an 11% gradual reduction within four years, on most suppliers (including Ukraine) considered to be jeopardizing US interests on its own domestic market.

But the US in any case cut the imports if Ukrainian steel in the first six months of this year by 82.4%, to $26.3 million, with the supplies of sheet rolled metal, the main import item, shrinking more than tenfold from $107.3 million to $10.5 million).

This was caused by the antidumping investigation the US launched in December last year about the import of hot-rolled sheet metal from ten countries, Ukraine included. As Yaroslav Shymansky, chief of the trade restrictions section at the Ministry of the Economy, told The Day, “the US is closing its market” to Ukrainian steel makers.

Ukraine has tried to compensate such a considerable loss by managing this year to increase the export of pipes to the US by 36% (to $5.7 million) and to bring up the supplies of tool-maker’s steel by 6.4 time (to $2.8 million). This, however, in no way solves the problem of foreign currency earnings. Total Ukrainian exports of steel to the US reached $269.13 million.

Russia, which earlier drastically cut its deliveries of Ukrainian pipes to its market, has also launched an antidumping investigation into the import of Ukrainian rolled metal. The Russian government commission to protect foreign trade and customs-and tariff policies accuses Ukraine and Kazakhstan of exporting zinc-plated rolled metal at dumping prices. The suit was filed by the Magnitogorsk Integrated Steel Mill and the Severstal Company, which account for over 50% of the total output of this product in Russia, Interfax-Ukraine reports. The claimants say Ukraine supplied 95.2% of this kind of rolled metal in 1998, 56.6% in 1999, and 52.8% in 2000.

In other words, Ukrainian metallurgists have been increasingly finding themselves undesirable persons on two strategic markets.

On the other hand, the Kinakh government, which announced at the very outset that it would actively compete for national interests on all fronts, can surely take claim today that it has achieved some success. The most recent reports say Ukraine and the European Union have initialed a draft agreement on trade in some steel products in 2002-2004 whereby the EU is to increase import quotas for Ukrainian metal products by 35%. A Ukrainian foreign ministry press release notes that “the sales-market-expansion agreement reached with the EU must be viewed as a basic step forward in the development of bilateral trade and economic relations.” As Oleksandr Shlapak, Minister of the Economy and European Integration, pointed out earlier, “The agreement greatly bolsters us, for Europe is the most stable market for Ukrainian metal products.”

Yet, it would be very wrong to overestimate the European success. The consultations a Ukrainian delegation began in Brussels on as March 26 about higher quotas for metal being exported to EU countries (increasing twofold the current 265,000 tons of rolled metal a year) are still very far from a desired outcome. Obviously, this is not least due the fact that Europe’s metallurgical works, which imported 242,800 tons of metal products in 2000, are not exactly enthusiastic about the raised quotas. In all probability, they will in reply be putting more pressure to make Ukraine cut short the economic experiment now underway in metallurgy. And it is now time for those who are lobbying the interests of steel mill owners in the government and parliament to think twice whether this will be of genuine use or equally genuine harm.

Nonetheless, director general of the Ukrainian Association of Metallurgical Industry, Volodymyr Taranenko, appears optimistic: Europe is not going to raise this question. “We have convinced them that the experiment in Ukrainian metallurgy is a normal thing similar to what they also have,” Mr. Taranenko told The Day. Simultaneously, he thinks that the segment of the European metal product market, now being opened for Ukraine, will in no way make up for Ukrainian losses in the US and Russia. According to Mr. Taranenko, with next year’s EU quota for Ukrainian metal products being about 350,000 tons, “We shipped over one and a half million tons to the United States in the past.”