Export of iron ore from Ukraine in the second half of the year may fall by 2.7 million tons – GMK Center

This is due to the increase in electricity prices, as well as the expected weakening of iron ore prices in China

Exports of iron ore products from Ukraine in the second half of this year may fall by 2.7 million tons, or by almost 15% compared to the first half of 2024, which means a loss of $250 million in export revenue. This is stated in the new GMK Center impact study on energy shortages and its impact on the export of iron and steel products from Ukraine.

High electricity prices, along with the expected decline in iron ore prices to the level of $100/t and below, analysts say, will cause a drop in exports of iron ore products to China, in particular iron ore concentrate. The share of electricity in the production of iron ore concentrate in Ukraine is up to 60%, pellets – 32%.

The average price of electricity in June 2024 in Ukraine increased by 50% y/y. (€112.3/MWh) and is 70% higher than the average price in the EU in the specified period. With the growth of electricity imports, it is electricity prices in the EU that determine the cost of electricity in Ukraine. It is expected that the price of electricity seasonally will increase by the end of the year. The domestic economy, for which the export of energy-intensive raw materials occupies a significant share, may suffer significant losses.

«De facto higher electricity prices than in the EU determine the non-competitive position of domestic exporters compared to competitors from other regions,» the study says.

Production and export volumes of steel products will depend on the physical supply/availability of electricity. For comparison, the expected steel output in the second quarter of this year may amount to 2.1 million tons, and in the fourth quarter of 2002, during the blackouts, it amounted to 0.7 million tons. Accordingly, the release of air defense systems is expected at the level of 12 million tons against 4 million tons in the 4th quarter of 2022.

Stable electricity supplies are also important for safety and prevention of accidents in metallurgical production.

Recall that electricity imports are probably the only guarantee of stable energy supply for Ukrainian business, which is not connected with critical infrastructure and defense industry. Planned restrictions do not apply to industrial

Stable electricity supplies are also important for safety and prevention of accidents in metallurgical production.

As GMK Center reported earlier, electricity imports are probably the only guarantee of stable energy supply for Ukrainian business, which is not connected with critical infrastructure and defense industry. Planned restrictions do not apply to industrial consumers who purchase imported electricity. However, at the end of May, the government revised the share of its consumption, which allows it to work without blackouts, raising it to 80% from 30%. This decision was made without prior discussion with the business.