Industrial production in Ukraine to grow by 5.9% y/y in 2023

After falling by 37% in 2022, industrial production in Ukraine grew by 5.9% last year. For last year, Gosstat released only industrial production indices, without disclosing production volumes in physical terms.

The growth of industrial production last year was supported by such factors as:

• increased business activity;
• stable operation of the energy system throughout most of the period,
• stable operation of logistics routes that were rebuilt after the war (until November, when the blockade of border crossings with Poland began);
• the start of operation of the sea corridor in the second half of the year.

In January-February last year, due to disruptions in electricity supplies, industrial production collapsed by 40% y/y and 28% y/y respectively. However, due to the positive dynamics in the following months, industrial production at the end of the year came to a slight plus.

The most affected industry last year was once again steel industry in terms of steel ore mining, which decreased by 10% y/y. In turn, steel sector showed only 0.2% growth y/y. In 2022 the production volume in steel industry decreased by 66.5% y/y, and the extraction of steel ores – by 61.7% y/y.

Last year’s increase in output in mechanical engineering by 16.7% y/y (in 2022 – decline by 43.1% y/y) only marginally supported the demand for steel in the country. According to estimates of OP Ukrmetalurgprom, steel consumption in Ukraine in physical terms in 2023 increased by 2.2 times – up to 3.5 million tons.

Currently, industry is not a driver of economic recovery. For example, due to infrastructure rehabilitation programs, the volume of completed construction works in Ukraine in 2023 increased by 22.6% y/y. Therefore, the demand for steel in Ukraine last year increased mainly due to steel products in the construction sector.