Situation in 1989 - 1993
Steelmaking in the Czechoslovak Federative Republic 1989-1993
In 1989, the Czechoslovak Federative Republic produced 15.5 mil t of steel, in 1990 14.9 mil t of steel and in 1991 12.1 mil t of steel. In 1991, 4 mil t of rolled material and 495,000 t tubes were exported. Export became in that situation the method of compensation for the fall in inland demand.
Between 1990 and 1991, high price increases on the input side as well as on the output side occurred due to liberalisation of prices. Metallurgy received no financial support. All enterprises were transformed into state joint-stock companies. Herewith, initial presumptions for their privatisation were created.
14 decisive production organisations in addition to a number of smaller enterprises were engaged in the Czechoslovak Federative Republic in production of steel, rolled material or tubes.
Apart from all these problems, steelmaking already had at the beginning of transformation presumptions for further existence not only from the viewpoint of the domestic market but also from the viewpoint of the international division of labour. It had a number of production equipment on the European technical-economic level, was able to manage in the past with its own labour force such difficult problems as technological solutions for using less qualitative ores and reconstruction of open-hearth furnaces into tandem furnaces, and it developed steel production technology Oxyvit and others.
Within the non-investment aid financed from PHARE funds, a restructuralisation study was elaborated by a consortium of foreign consulting firms. This study had to be the base of a governmental programme for restructuralisation of metallurgy in the Czechoslovak Federative Republic. It presumed reduction of the production volume down to approx. 50 % of the 1990 level, i.e. approx. 8 mil t.
The period from 1989 until the break-up of the federation can be divided into two stages from the viewpoint of steel production in the former Czechoslovak Federative Republic:
- November 1989 - May 1991: no more pronounced cuts in production occurred even when the sales and production crisis in the customer branches appeared in the second half of 1990
- June 1991 – December 1992: consequences also appeared fully in metallurgy since June 1991. This was no longer able to set off the fails in domestic demand on steel and steel products by increased exports. In this way, steep falls in steel production in the second half of 1991 occurred. Attenuation of the domestic market continued in 1992. The effect of disintegration of the COMECON market is not to be discussed in detail; it affected not only direct export of the metallurgical material but also indirect export in consequence of the drastic decrease in sale possibilities of mechanical engineering of both republics. From the export volume of rolled material and tubes into the former COMECON countries amounting to approximately 2 mil tons, practically nothing was exported more. In this period, metallurgy took basic steps within the economic reform, beginning with denationalisation with the subsequent process of privatisation. Independent trade companies instead of former state enterprises were founded.
Setting off internal sale problems by increasing export was possible by comparative advantages of the temporary character (lower level of share of personnel cost, neglected investment in ecology, rate of exchange and price level in foreign markets). These enabled steel producers to export metallurgical material at prices approximately 15 to 20 % lower than the current world prices without applying dumping prices.
Partition of the federation led from the viewpoint of structure of rolled material production to fundamental polarisation of production between both, since that time independent republics.
The Czech Republic -
production of semi-finished products and long products (approx. 75
%) prevailed pronouncedly
The Slovak Republic - only flat products are produced
Structural changes and the effect of market economy came to light perhaps most pronouncedly in production of steel tubes. Whereas in 1989 in Bohemia and in Slovakia 1,580,000 tons of steel tubes were produced in total, their production dropped evenly in both, now independent republics, down to 46.8 % in 1993. Also the structure of tube production changed. The percentage of seamless tube production in the total production of steel tubes changed from nearly 70 % in 1989 to 55 % in 1993.
|Total consumption incl. semi-products for production of steel tubes and other products incl.:||8,100||5,210||9,047|
|a) consumption for production of tubes and others||3,000||2,180||1,560|
|b) consumption for other branches in total||5,100||3,030||2,800|
|Steel consumption in 1990-1992
(Data in 1000 t)|
How the volume of domestic consumption in the Czech Republic and the Slovak Republic changed may be illustrated in the example of rolled material and tubes. Total consumption, i.e. incl. semi-products for production of steel tubes, dropped from 8.1 mil t in 1990 down to 4.36 mil t in 1992, i.e. by 46 %.
The steel industry encountered these changes so that from the viewpoint of export structure previously indirect steel export in the form of steel contained in the products of the processing branches was replaced by direct export of steel products, where penetration into the world-market territory was successful. From the viewpoint of the macroeconomy, undesirable exports of semi-finished products occurred, on the other hand this was a step which contributed undoubtedly to the stability of currency. All this occurred without subsidising steelmaking, and export to territories outside the European Union grew much faster.