By-product coke industry of Ukraine (2007)

Market specificity

Excessive facilities in the light of weak demand for Ukrainian coke products from foreign consumers; coal coke shortage; lack of cheap transportation infrastructure – these are the main stumbling blocks in the way of Ukrainian coke industry development. The past 2007 made no exception for the segment.

In the conditions of tight competition on export markets raised by Russian and Chinese coke producers, excessive facilities of Ukrainian coke plants lead to even greater dependence on domestic demand. High production cost of Ukrainian coke limits demand from other industries and focuses it mostly on metallurgy. Uneven distribution of steel mills and coke plants among Ukrainian financial groups – with sharp shortage of high-quality coking coal – leads to the paradox, when excessive coke facilities nearly exclude the chance to satisfy demand of Ukrainian steel mills with domestic production.

While “coke” assets remain rather cheap, acquisition of coke plant does not solve all the problems with coke supply for steel producers. The main hardships for coke producers are related to coking coal deliveries. In 2006, shortage of coal for coking was estimated at 8 mn tons (more than 7.7 mn tons were imported), and in 2007 – 10-11 mn tons (approximately 10.5 mn tons were imported).

The need for import is not just reasoned by small commercial volumes, but also by a principal shortage of special coal types essential for coke production in Ukraine. Absence of ports, which would accept vessels with cargo capacity over 150 ths. tons and immature transportation infrastructure bring forward the situation when these coal types were only imported from Russia until 2006. Deficit of coking coals in Russian Federation forced Ukrainian metallurgists to expansion of supply geography. About 8% of coking coals were imported to Ukraine from the USA and Australia in 2007 and around 14% destined from Kazakhstan.

Further increase of prices for Russian coal and its forecast deficit caused by growing demand from Russia’s internal market, will most likely force Ukraine’s financial and industrial groups to take some market diversification measures as soon as in 2007. The USA and Australia may become the main alternative raw stock sources.

Level of output concentration (2007)

OJSC Avdeyevskiy Coke Plant

Avdeyevskiy Coke plant is the biggest coke producer in Europe, and produces 18% of Ukraine’s coke output by results of 2007. In 2005 the plant reconstructed new coke batteries.

Coal balance is made of supplies from KrasnodonUgol’ and PavlogradUgol’ coal enterprises (these supply more than half of demand), the short volumes are purchased from the Russian Federation.

The main customers of Avdeyevskiy Coke Plant used to be OJSC Ilyich Iron & Steel Works, OJSC Enakiyevo Iron & Steel Works , as well as OJSC Azovstal. Average annual capacity utilization of the company in 2007 was at the level of 70%.

OJSC Alchevskiy Coke Plant (AlKZ)

OJSC Alchevskiy Coke Plant (AlKZ) has become the second biggest coke producer in Ukraine, with an output of 3.2 mn or 16% of Ukrainian production in 2007. Average annual capacity utilization of the company in 2007 was at the level of 90%.

Having started building a new coke battery in 2005, the enterprise finished it in September 2006. Commissioning of the new coke battery No.10-bis with annual capacity 1 mn tons brought gross production capacity of the plant to 3.6 mn tons.

Alchevskiy Coke was built to meet needs of Alchevsk and Dneprovskiy Iron & Steel Works in coke. Similar to Avdeyevskiy Coke Plant, Alchevsk-based plant suffers hardships with coking coal supply.

Industrial Union of Donbass corporation (IUD) controls Alchevskiy Coke Plant.

OJSC Mittal Steel Kryvyi Rih

Similar to OJSC Azovstal ISW, coke production of the steel mill is oriented at satisfaction of internal needs. The mill compensated short coke volumes in 2007 with import and domestic market purchases from BagleyCoke plant and Avdeyevskiy Coke Plant.

OJSC Zaporozhkoks (ZaporozhCoke)

Zaporozhkoks produced 1.8 mn tons of coke in 2007 (9% of output in Ukraine, 7% less than indices of 2006). The capacity utilization rate of the plant is close to 90%.

Zaporozhstal ISW remains key consumer of the plant’s coke (the latter supplied 1.5 mn tons of coke to the steel mill last year). Zaporozhkoks meets around 80% of the mill’s demand for coke, but there is still a problem with raw stock supply.

Due to the lack of its own coal reserves, Zaporozhkoks is forced to import coking coal.

Prospects

The main demand for coking coal is determined by cast iron production upon permanent requirement of ladle productions (machine building, food processing, construction industry, chemical industry, etc.) – around 1.5 mn tons.

Potential capacities of furnace production in Ukraine make 34-38 mn tons of cast iron each year, and cast iron production volume is defined by the expected demand.

Grade structure of coal imports, according to estimates of UkrKoks (Ukrainian Coke) Production Association, should consist of 42-47% of fat coals and 40-42% of coals from grades KO, KC, and OC.

Russia remains the main exporter of Ukrainian coal, though grade structure and quality of the supplied coal has a tendency of worsening, as the best resources are applied at domestic enterprises. Besides, the share of coals extracted by open pit method will expand within the supplies. This kind of coal is described with higher petrographic heterogeneity, unstable technical features, foremost – coking capacity. Presence of large volumes of such coals in charges of Ukrainian plants demands considerable changes in technological scheme of their preparations – meaning transfer from DSh scheme (all charge reduction) to schemes DDK or GDK (differentiated or group reduction of components).

Import of coals from non-CIS states is restricted by capacities of Ukrainian ports to receive large tonnage vessels and ensure standard terms for their unloading. By and large, import of such volumes of coal in presence of imported coke becomes a problem due to transportation component.

Hence, solution to the problem of coke production and consumption can be found through reforming and developing of domestic raw stock basis, improving of coke quality, and introducing of technology of coal dust fuel application in furnace production. All these components should contribute to significantly lower consumption of metallurgic coke and, therefore, reduce shortage of domestic coking coals.