Scrap exports from Ukraine increased by 35.3% y/y in the first half of the year

Monthly export volumes are approaching pre-war levels

In January-June 2024, Ukraine’s scrap industry increased exports of ferrous scrap by 35.3% compared to the same period in 2023, to 124.53 thousand tons. This is evidenced by the data of the State Customs Service.

The bulk of exports went to Poland – 108.37 thousand tons. 11.69 thousand tons of scrap were exported to Greece, and 4.25 thousand tons to Germany. The average monthly export volume in January-June amounted to 20.75 thousand tons, up from 15.34 thousand tons a year earlier.

In June, Ukraine exported 22.16 thousand tons of scrap, up 48.2% month-on-month and 51.8% compared to June 2023. Revenue from scrap exports increased by 45.9% y/y over 6 months to $39.76 million, and by 46% m/m and 62.8% y/y in June – to $6.89 million.

Ukrainian scrap companies export about 15% of their scrap, and the volumes consistently exceed 20 thousand tons per month, approaching pre-war levels. At the same time, scrap exports are currently carried out without paying any duty to the state budget.

The increase in shipments is taking place amidst the difficulties in collecting scrap due to the hostilities, as most scrap enterprises were located in the temporarily occupied territories or in the war zone before the full-scale war.

An additional factor putting pressure on the scrap market is the lack of sales of scrap by one of its main suppliers, Ukrainain Railways. The railroad operator stopped selling scrap in September 2023, which had an extremely negative impact on the market and the entire Ukrainian steel industry.

Such conditions pose a threat to the operations of domestic steelmakers, as the partial unblocking of sea exports helps to increase the utilization of steelmaking capacity. The improved prospects for the industry are also evidenced by the steel production data for January-June, which increased by 36.9% y/y – to 3.9 million tons. For a significant increase in capacity utilization, sufficient scrap supply is critical, and scrap exports are impractical. At the same time, according to the latest forecasts of UAVtormet (April 2024), 250-300 thousand tons of scrap will be exported from Ukraine this year, with collection rates of 1.75-1.85 million tons.

“The likelihood of actual figures matching forecasts in a time of war is sharply reduced due to high uncertainty. The interest in continuing to export scrap may lead to short-term disruptions in supplies to domestic consumers, as it is not known to what extent the procurement plan will be fulfilled and in what proportion the actual distribution between the domestic market and exports will be made. At the same time, given the limited logistics capabilities and problems with financing public spending, it is questionable whether the current duty-free export of scrap is appropriate,” said GMK Center analyst Andriy Glushchenko.

Scrap metal is a strategic raw material for the global steel industry to achieve its carbon neutrality goals. Most developed countries are now in favor of a ban on scrap exports to preserve critical raw materials in the transition to green production.

Earlier, Oleksandr Kalenkov, President of Ukrmetalurgprom, stated that scrap metal is exported through the European Union, which has a preferential export duty of €3 per ton, and from there the raw materials are redirected to real consumers in Turkey. He noted that exporting the raw materials directly to Turkey would cost €180 in export duties, and the Ukrainian budget has already lost UAH 350 million.

The head of the association called for a temporary ban on the export of ferrous scrap to provide steelmakers with strategically important raw materials in the face of the ongoing war. He also clarified that a ton of scrap metal processed into steel contributes 10 times more to the budget than the export duty on scrap sales to the EU, which is about $300 per ton.

As GMK Center reported earlier, in 2023, the volume of ferrous scrap collection in Ukraine increased by 28.1% – to 1.27 million tons compared to 2022. Over the same period, scrap supplies to steelmakers amounted to 1.034 million tons (+15.4% y/y). Exports increased by 3.4 times compared to 2022 to 182.48 thousand tons.