2.5.10. CHEMICALS

Export of chemicals is one of the priority guidelines in development of Ukraine’s foreign trade. Throughout 2000, currency earnings from foreign trade in chemicals accounted for over 12% in all-Ukrainian exports of goods and services.

Analyzing Ukrainian export of chemicals in 2000, there can be highlighted two major groups of commodities. These are the 28th group “Products of inorganic chemistry..." and the 31st group “Fertilizers".

Over the period under review, exports of commodities within the group 28 totaled USD 637.7 mln. This suggests a 31% growth against 1999. One of the main components of this group is ammonia, which accounts for over 30% in the group. Throughout 2000, shipments of the commodity made USD 193 mln. This is by 14% up from the respective figure of 1999.

Ammonia is a raw material for production of nitrogenous fertilizers. Except for domestic consumption of the product, ammonia is completely exported. General conjuncture on the world ammonia market in 2000 may be evaluated as favorable for Ukrainian exports.

Most export supplies of Ukraine-made ammonia were directed to the USA, Spain, Turkey, the Netherlands, India, Morocco, and other countries.

The biggest Ukrainian exporters of ammonia are as follows:

- Odessa Priportovy Plant;

- Stirol Concern;

- OJSC Dniproazot;

- OJSC Azot of Cherkassy;

and gas traders OJSC Energotransinvest and OJSC Ukrenergosbyt.

The Group 31 comprises all types of fertilizers. In 2000, export of fertilizers yielded USD 412.7 mln, which is 30% up from the previous year. Nitrogenous fertilizers traditionally hold weighty portion in the group accounting for some 90%. In 2000, exports of these products made USD 388.5 mln. As compared to the year 1999, shipments of the commodities overseas augmented by 25%.

Main nitrogenous fertilizer is urea. Conjuncture of the global market for this product in 2000 can be called favorable for Ukrainian exports. Production of the commodity is fully export-import oriented. Major Ukrainian exporters of urea are as follows:

- Odessa Priportovy Plant;

- Stirol Concern;

- OJSC Dniproazot;

- OJSC Azot of Cherkassy;

and gas traders Energotransinvest OJSC and OJSC Ukrenergosbyt.

Starting late 1999, the market for urea has featured the trend of instable growth of prices. Thus, despite certain period of market letdown, the general trend was obviously positive. There supposedly are four reasons for such changes. Three of these were called forth by the preceding market crisis in 1997-1999. It was this period of low prices that triggered price jump later.

Foremost, this is complete geographic re-orientation of the market, which took place two years after China left the market. It really was the crises for Yuzhny. Baltic states, Indonesia, and countries of Middle East retained their traditional markets once China left, whereas Yuzhny, which then was completely oriented at imports to China, was forced to find alternative markets to sell off some 1.5 bln. tons of urea. Similar amount was shipped to China in 1996. All of this happened under competition, which escalated on other markets. It fostered long-term crises, out of which the market started to recover only in 1999. And here is the main reason of further scenario. The period of low prices did not do much redistribution of present markets, but rather created the new ones.

The second reason of price trends in 2000 was also brought forth by the preceding crises. The very absence of profit in this sector led to evolvement of the second main reason – outflow of assets from nitrogenous fertilizers production sector. The prices for shares in large producers dropped, since they suffered losses, whereas the enormous amount of new promising directions evolved on the stock market. Example is the companies that offer Internet and related technologies. That's why, most of investors, having examined their priorities, transferred their assets to another sectors of economy. In the crises situation, this led to shutdown of effective facilities in production of nitrogenous fertilizers worldwide.

The third factor, which also was brought up by crises, was increased qualification of marketing research at exporting enterprises and obtaining of survival experience in the most crises situations. Characterizing this factor, one should be concerned about maturing qualification of employees, which deal with sales, development of marketing strategies, as well as elaboration of schedule of operations that survived throughout crises period and managed to recover.

The fourth factor, which defines price tendencies in 2000, was global growth of prices for energy resources. Prices for natural gas, which is the main raw material for production of urea jumped up in 1999 following the prices for oil. The most obvious results of such growth appeared on the US market. Together with capital outflow from nitrogenous industry, this called forth shutdown of numerous producers of the commodities. Appealing directly to price analysis, it should be noted that prices for urea were on stable upturn starting back in December 1999 with USD/t 75-80 and coming to USD/t 95-97 FOB Yuzhny in March. Reasons for such growth were seasonal demand and total increase in import purchases on the markets of Southern America and Europe. After seasonal recession in April – May, the price again began to rise coming to the record USD/t 135-137 in August. After this, having gone slightly down, the price remained in the range of USD/t 110-117 FOB Yuzhny.

Forecasts for a couple of months are not very sound. In February-March, prices will gradually reduce; thus, coming to some USD/t 98-100. However, as soon as active import purchases of fertilizers from Europe begin, starting April 2001, the price perhaps will grow again.