Iron ore market in Russia is largely ruled by domestic consumption. About 75% of ore is sold domestically, to Russian metal combines. Last year production of cast iron dropped by 2.6%; that is why the national mining and metallurgical complex’s results slid by 0.2%. Production of sintering ore contracted by 34% to 2,8 mln. t, iron ore concentrate by 1,3% to 92,4 mln. t (including pelletizing productions). Production of agglomerate went down by 5,4% to 5,5 mln. t; production of pellets added 3,6% to 35,7 mln. t.

In January-February 2006 Russian mining and metallurgical companies (MMCs) boosted commodity iron ore production by 4.3% to 16,37 mln. t, from the same period last year. Output pf agglomerate shrank by 18.9% to 792,1 thd. t; production of iron ore concentrate and pellets increased by 3,2% and 2,4% - to 15,69 mln. t and до 6,19 mln. t, correspondingly.

Within the reported period Lebedinsky MMC cut down production of concentrate by 4.6%; “Karelsky Okatish” (Kostomukshsky MMC) boosted commodity ore output by 12.7%; Mikhailovsky MMC – by 7.6%; Stoilensky GOK – by 4.8%. Within the two first months of 2006 “Karelsky Okatish” also escalated production of pellets by 10% to 1,458 mln. t.

Domestic consumption for iron ore at the beginning of 2006 was supported by manufacturers of cast iron. In January-February domestic metallurgists expanded production of cast iron, from the same period a year ago, by 1.6% to 8,34 mln. t.

Key Russian manufacturers of sintering ore are Mikhailovsky and Stoilensky MMCs; agglomerate – only Kachkanarsky and Vysogorsky MMCs, briquettes – Lebedinsky MMC. The largest manufacturers of concentrate is Lebedinsky, Mikhailovsky, Stoilensky, Kachkanarsky MMCs and "Karelsky Okatish”.

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Picture below represents Russian pelletizing combines. Oskolsky EMK produces metallic pellets.

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By now, all domestic MMCs have become parts of vertically integrated chains connected to almost all metal combines in Russia. Lebedinsky and Mikhailovsky MMCs are covering a greater part of the free market.

In 2005 domestic shipments of iron ore by all commodity groups fell by an averaged 2% to 72 mln. t; exports grew by 6% to 21 mln. t, predominantly due increasing shipments of sintering ore (+ 38%) and pellets (+ 26%). A share of pellets in the Russia exports structure amounted to 61% (in 2005 году), concentrate – 35%, sintering ore - just 4%.

China leads among consumers of Russian iron ore (28% last year), followed by Ukraine (14%), Poland and Czechia (12% each), and Slovakia (11%).

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Within the two first months of 2006 Russian exporters boosted shipments to Ukraine by 3%, thanks to increased shipments from Lebedinsky MMC (concentrate – by 60% to 162 thd. t, briquettes – by 141% to 140 thd. t). Remarkably, only three Russian MMCs exported to Ukrainian MMK named after Ilyich, which does not have an iron ore base, and Yenakiyevsky MZ owned by “SKM”; the three are Lebedinsky, Mikhailovsky and Stoilensky. The latter two slashed exports of sintering ore by 20% to 93 thd. t.

At the same time, in February, OAO “Mittal Steel – Krivoy Rog” exported to Mettal’s companies in Europe 11.5 thd. t of sintering ore, including 7,6 thd. t in Poland and 3,9 thd. t - in Romania. Otherwise in future Mittal will confine its European mills’ needs in imported ore. Lakshmi Mittals sticks to the strategy of providing its companies with ore due to expanded production in Liberia, Bosnia, Kazakhstan and Mexico and further vertical integration in the metal division. The strategy is impeding foreign manufacturers’ ore supplies to Eastern Europe, especially from Russia and Ukraine.

In January-February of 2006 Ukraine increased production of iron ore by 0.3% to 11,146 mln. t; iron ore concentrate retreated by 1% to 8,460 mln. t; volumes of ready iron ore raw materials dropped by 4% to 10,3 mln. t, including agglomerate - by 4% to 7,509 mln. t pellets – by 4% to 2,791 mln. t. In 2005 production of commodity iron ore increased 1.5 times nearly to 70 mln. t.

Compared to other global and Russian analogues, Ukraine’s iron ore base is characterized by a poorer quality and production environment, higher levels of energy and raw material consumption. Ukrainian iron ore contains 3-4% less magnetite iron at 64-65%.

In 2005 leading MMCs in Russia were keeping improving physical and chemical characteristics of their production, thus, boosting its competing abilities. Mikhailovsky MMC is now building a floatation plant aimed at increasing iron content in concentrate up to 70% per ton. Stoilensky MMC started processing concentrated into 68% iron containing products at the end of last year. Lebedinsky MMC is selling concentrate (69,2%), pellets (66,5%). “Karesky Okatish” sells 65%-iron concentrate. Generally, an average content of iron in the production made throughout Russia comes to 63,1%.

Through 2005 Europe-headed export prices for iron ore in Russia and Ukraine were following global tendencies, meaning a descent from record heights at the year beginning down to late 2005. Exported pellets landed at the lowest - from Russia (-39%), from Ukraine (-34%). Quotation for Russia- and Ukraine-made concentrates dwindled by 30 and 24%, correspondingly.

Early in 2006 export prices from both Russian and Ukrainian manufacturers stabilized. Russian pellets now cost $95/t on the European market, Ukrainian – $88/t; Russian concentrate change hands at 68/t, Ukrainian – 63/t.

Last year the Russian market was also a witness to going down domestic raw materials. Prices for pellets receded by 33%, concentrate – by 41%. The market was idling from November 2005 to February 2006. In the later part of February pellets and concentrate inched up by 18% (to $55/t) and 23% (to $41/t), correspondingly. Russian quotations for sintering ore remained stable at 20-22/t through 2005-06.

On the neighbouring market, in Ukraine, prices for iron ore, produced both domestically and in Russia, came through dwindles since early last year to February-March 2006. Ukrainian pellets lost 45% to $57/t, Russian pellets – by 34% to $57,5/t. Russian concentrate wend down by 40% to $37,5/t, Ukrainian – by 35% to $46/t. Russian sintering ore kept the most stable at $6/t below the Ukrainian analogue-product.

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For the time being, mining and metallurgical complexes both Russia and Ukraine are waiting for completion of the global talks on prices for iron ore. As for the global prospects, as is well known, the talks have entered the new financial year with no consensus on the prices. And only time will tell what the outcome will be. Analytical Team of “MetalTorg.Ru” predicts a 15% rise in prices for iron ore in the current year.

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"Metal.Com.Ru" Analytical team