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The expectation of a drop in metal prices by market participants impedes the sales process

According to the Ukrainian Steel Construction Center (USCC) Association, in October 2019, prices for construction metal fell by 4.3% on average.

 

In Q3 2019, the consolidated index fell by 10.5% to 89.5% against the same period of 2018.

Comparative analysis of January–October 2019 and 2018 showed that the highest decrease was recorded in prices for channels (-26.4%), hot rolled sheets (-26.4%), and hollow sections 100×4 (-25.6%).

ProductCurrent quotation, ₴% per month% to 10 months of 2018
Hot rolled sheet 5–14 mm15.14 -5.61 -26.38
Beam No. 2018.55 -3.13 -18.41
Channel No. 1816.48 -1.79 -26.4
Angle 63х516.43 -1.79 -21.65
Hollow section 100х417.1-5 -25.65
Round pipe 114х417.35 -4.93 -25.38

“The global steel market is under pressure caused by deflated demand and trade wars. This, in turn, affects the Ukrainian market, resulting in a sharp drop in prices,” explains Denys Rysukhin, CEO of Metipol, a producer of polymer-coated galvanized steel coil.

Starting 2019, construction metal prices continued to decline — the aggregate index in UAH dropped by 20.3% to 79.7%.

“The expectation of a drop in metal prices by market participants impedes the sales process. A drop in prices for construction metals and ferrous metals usually occurs on a parity basis. Therefore, it is not a key factor influencing the demand,” said Inna Ponomaryova, CEO of Vikant, a leading wholesale and retail company in the rolled steel market.

Construction is the main driver of domestic consumption of metal. According to GMK Center, 68% of rolled steel on the domestic market is used in the construction sector.

To date, the construction sector consumes steel products in the following proportions: sheet — 60%, angles — 8%, beams — 6%, channels — 12%, round pipes — 4%, and hollow sections — 10%.

According to Igor Tonev, CEO of Metinvest-SMC, the apparent steel consumption in Ukraine in 2019 will amount to 4.7 million tons.

“Consumption will continue to grow by 3–4% per annum due to the economic recovery and a low comparative base after the 2014–2015 crisis. The price trends in the domestic market will mirror the global trends,” Mr Tonev summarized.