Industrial production in Ukraine decreased by 37% in 2022

The output of products at iron and steel enterprises suffered the most

Industrial production in Ukraine in 2022 fell by 36.9%, while in 2021 an increase of 1.9% was recorded. Last year, the State Statistics Service published only industrial production indices, without disclosing production volumes in physical terms.

The collapse of the industrial production index occurred last year in March-May – еo -30.5% y/y. In the following months, the dynamics of the fall almost leveled off, amounting to -36.9% in annual terms by the end of 2022.

The deterioration of the situation was observed in October-December 2022, after the start of rocket attacks on the energy infrastructure and interruptions in the supply of electricity. Under those conditions, industrial enterprises temporarily stopped working or reduced production.

Iron and steel industry suffered more than other sectors of the economy: the volume of production in steel sector decreased by 66.5%, and the extraction of metal ores – by 61.7%. For comparison, the decline in coal and oil and gas production in 2022 was only 7.7% and 8.4%, respectively.

Industrial production was partly supported by the relocation of capacities to safer regions. During the year of the war in Ukraine, under the government relocation program 800 enterprises were moved, and more than 620 of them have already resumed work in a new location.

Due to a 43.1% drop in the volume of production in engineering, the size of steel consumption in the country also decreased. According to Metinvest SMC estimates, steel consumption in Ukraine in physical terms in 2022 decreased by 55% y/y – to 2 million tons.

The dynamics of the decline in industrial production is lower than, for example, in construction. Thus, the volume of construction work performed in Ukraine last year decreased by 65.1%, and the production of building materials – by 65.4%.

The industrial production in the EU is unstable. Seasonally adjusted industrial production in the Eurozone fell by 0.5% in February 2023 compared to the previous month, and by 0.6% in the EU. According to Eurostat, industrial production in the Eurozone increased in January by 0.7% m/m (analysts expected 0.4% m/m) compared to 1.3% m/m inDecember. On an annual basis, the growth amounted to 0.9% y/y with expectations of 0.2% y/y.