VZCZCXYZ0000
PP RUEHWEB

DE RUEHKV #0220/01 0311106
ZNR UUUUU ZZH
P 311106Z JAN 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 1059
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS KYIV 000220 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS TO USITC FOR LMSCHLITT 
STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR 
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK 
STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA 
 
E.O. 12958: N/A 
TAGS: ETRD ECON UP
SUBJECT: UKRAINE: USITC ANTIDUMPING INVESTIGATION ON SILICON METAL 
FROM RUSSIA 
 
REF: STATE 4821 
 
¶1. Post provides the following information regarding silicon metal 
production in Ukraine in response to reftel request.  This response 
contains no business proprietary information. 
 
Overview of Metallurgy Industry 
------------------------------- 
 
¶2. Metallurgy is one of the Ukrainian economy's largest sectors, 
accounting for approximately 40% of GDP.  The metallurgy industry 
started in Ukraine in the 19th century, when blast furnaces sprang 
up throughout eastern Ukraine.  Proximity to raw materials -- iron 
and manganese ore deposits, coking coal, and non-metallic materials 
(limestone, molding sand, refractory clay, etc.) -- has continued to 
fuel the sector's growth.  Ferrous and non-ferrous metals and 
products accounted for 43% of Ukraine's exports in 2006.  Ukraine 
generally exports about 75-80% of its total production.  Most 
enterprises in the industry are engaged in the production of ferrous 
metals (over 44%) and extraction and enrichment of crude ore (over 
30%), with coke production coming in third.  The non-ferrous 
metallurgy sub-sector is much smaller, ranking fourth.  The largest 
branch of the non-ferrous metallurgy industry is aluminum 
production. 
 
Silicon Production 
------------------ 
 
¶3. Ukrainian production of silicon can be broken down into three 
main categories: 
 
-- Ferrosilicon, covered by several subheadings of the Harmonized 
Tariff Schedule of the United States (HTS); 
-- Silicon metal containing less than 99.99% silicon, and matching 
HTS subheadings 2804.69.10 and 2804.69.50, of interest to the USITC 
in this case; and 
-- Semiconductor-grade silicon metal containing more than 99.99% 
silicon, covered by HTS subheading 2804.61.00. 
 
Ukrainian producers use different terminology, however, calling 
these three categories "technical," "polycrystal," and "monocrystal" 
silicon.  Ukrainian terminology may not exactly correspond to the 
U.S. classifications. 
 
¶4. Non-ferrous metallurgy, of which silicon is only a small part, 
makes up roughly 6% of total metallurgical production.  Silicon 
products therefore constitute a tiny fraction of Ukraine's 
metallurgy industry.  Additionally, silicon metal containing less 
than 99.99% silicon accounts for only 0.81% of the total silicon 
exports (by value) during 1999-2002.  During this period, Ukraine 
exported ten times more semiconductor-grade silicon metal 
(containing more than 99.99% silicon), and over a hundred times more 
ferrosilicon (both by value in USD). 
 
¶5. Post was unable to locate most of the specific data requested 
reftel.  There is very little publicly-available information on 
Ukraine's silicon industry, especially going back to 1999-2002. 
Post filed a formal request for information with the Ministry of 
Industrial Policy, which maintains oversight of the metallurgy 
industry, and is responsible for state-owned enterprises operating 
in this sphere.  Ministry officials cautioned us in advance that 
they would likely be unable to provide the data we requested.  In 
the end, the Ministry did not respond to our request as of February 
¶1. 
 
Ukrainian Exports, 1999-2002 
---------------------------- 
 
¶6. Below are figures for Ukrainian exports of silicon metal 
containing less than 99.99% silicon, 1999-2002: 
 
(Note: Quantity is expressed in short tons; value in thousands of 
U.S. dollars.  End note.) 
 
             To USA            Total (to World) 
             ------            ---------------- 
       Quantity     Value     Quantity     Value 
       --------     -----     --------     ----- 
Year 
---- 
1999      0           0         593         637 
 
2000      0           0         635         588 
 
2001      0           0         499         448 
 
2002     300         253        446         406 
 
 
 
 
Ukraine's Top Export Partners (by value): 
 
1999: Russia (94.5%), Netherlands (4.5%), Belarus (1.0%) 
2000: Russia (83.9%), Tajikistan (13.2%), Belarus (2.9%) 
2001: Russia (82.3%), Tajikistan (17.2%), Belarus (0.3%), 
      Israel (0.2%) 
2002: United States (62.3%), Russia (26.1%), Bulgaria 
      (6.3%), Israel (2.5%), Moldova (2.2%), Other (0.6%) 
 
Source: United Nations Commodity Trade Statistics Database 
 
Note: Data is for HS1992 and HS1996 code 280469, which designates 
silicon metal with less than 99.99% silicon content.  This data 
should capture both the 2804.69.10 and 2804.69.50 subheadings, noted 
in reftel as the subjects of this investigation, and nothing more. 
End Note. 
 
The Zaporizhskiy Titanium-Magnesium Combine (ZTMC) 
--------------------------------------------- ----- 
 
¶7. Reftel listed the Zaporizhskiy Titanium-Magnesium Combine (ZTMC) 
as the sole Ukrainian firm believed to have produced silicon metal 
with less than 99.99% silicon during 1999-2002.  In the early 1990s 
ZTMC was a major producer of silicon in Ukraine.  The plant produced 
several different metals, but silicon accounted for 80% of the total 
plant output at that time.  In 1998, however, ZTMC management halted 
silicon production, claiming that it was unprofitable.  At the same 
time, ZTMC restarted production of titanium, previously halted in 
1993, as the government had launched a program to promote titanium 
production. 
 
¶8. ZTMC is a state-owned enterprise and has struggled under the 
market conditions of post-Soviet Ukraine.  Some industry analysts 
have accused ZTMC's management of intentionally and systematically 
bringing ZTMC to bankruptcy, and even of laundering money for the 
state budget.  ZTMC has regularly recorded losses of several million 
dollars, and by 2003 held about 80 million dollars worth of debt. 
 
¶9. Although ZTMC halted silicon production in 1998, other firms have 
tried to use ZTMC's facilities to produce some silicon.  From 
1999-2004, several foreign companies rented the silicon-production 
facilities at ZTMC, including the Russian firm Grafi.  In 2002, a 
semiconductor plant was established at ZTMC, along with two other 
companies -- Kremniypolymer and Gamma.  Currently, only one part of 
ZTMC's semiconductor plant is officially in operation; it is rented 
by a small firm named Siltec, which produces semiconductor-grade 
silicon metal (containing more than 99.99% silicon), predominantly 
for domestic consumers.  Serhiy Terekhov, Chief Engineer of the 
semiconductor plant, estimated that ZTMC facilities produced 
approximately three to four tons of silicon metal (of various types) 
per month during 1999-2002. 
 
TAYLOR