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Domestic market as a development factor for Ukraine's metal industry

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  • V. Venger, V. Osypov

Abstract

The article considers the preconditions for the transformation of Ukraine's metallurgical industry into a global producer and exporter of metal products. It is shown that this process began in the early 90's of the 20th century, after inheritance, from the former USSR, of a powerful mining and metallurgical complex representing an integrate technological system from extraction and processing of iron ore to the production of finished rolled metal and pipes. An additional factor contributing to the development of the industry's foreign economic activities was its resource potential based on the presence of national highly skilled personnel, domestic raw material base and numerous production facilities able not only to fully satisfy the needs of the domestic market but also provide significant volumes of exports. The authors prove that, due to its export orientation, Ukrainian metallurgical industry of Ukraine has become a hostage to the foreign economic situation, which in adverse periods negatively affects its development. It is shown that this negative influence is manifested, first of all in the decrease of domestic output and exports of metal products, lower profitability of the metallurgical enterprises, and reduction of production personnel. In order to reduce the negative impact of the foreign trade situation on the development of domestic metallurgical industry, the authors have analyzed the experience of the largest steel producing countries. It is proved that the main outlets of these countries are their domestic markets. In particular, the share of domestic consumption of metal products in the five largest steel producing countries in their total metal output in 2015 ranged from 64.5% in Japan to almost 99.1% in Germany, while in Ukraine the share of domestic consumption of metal products in 2015 was only 16.6%. Based on the results of the research, the authors develop and propose guidelines for the reorientation of domestic metal producers to the priority satisfaction of domestic demand through intensive development of domestic metal consumption. In particular, they prove that increasing the domestic consumption of metal products can be achieved through the development and implementation of national programs in industry, especially in construction, engineering, transport, energy and housing and public utilities. Also, the research has proved that expansion of the domestic metal market is only possible with increase in the output of deeply processed metal products and creation of their new types, improved quality and competitiveness, reduced resource intensity of the sector, as well as with innovation based upgrade of machinery and technology for the production of metal products; and reduced environmental hazards. It is impossible to achieve these goals without a radical modernization of the metallurgical enterprises.

Suggested Citation

  • V. Venger, V. Osypov, 2017. "Domestic market as a development factor for Ukraine's metal industry," Economy and Forecasting, Valeriy Heyets, issue 3, pages 69-84.
  • Handle: RePEc:eip:journl:y:2017:i:3:p:69-84
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