News Global Market Ukraine's steel sector 17 March 2023
Because of the war, the country currently controls about 50% of its steelmaking capacity
Strategic players see great investment potential in the steel industry of Ukraine, and the green steel industry after the war is capable of generating tens of billions of dollars of investment. This was announced by the Deputy Minister of Economy Oleksandr Hryban during the Ukraine Industry Recovery Day event. It is stated in a message on the department’s website.
According to Oleksandr Hryban, currently 90% of the country’s iron ore assets are located in controlled territories, Ukraine also controls about 50% of steel smelting and about 65% of generating capacities. The steel sector of the country suffered the greatest losses as a result of the invasion of the Russian Federation, and suffers not only from the destruction of enterprises in the east, but also from the narrowing of logistics routes.
According to statistics, due to the full-scale invasion of the Russian Federation, Ukrainian steelmakers reduced production of pig iron and steel by 70-85%.
“In 2021, the share of the steel industry in Ukraine’s GDP was 10.3% of GDP, and it accounted for 33% of total exports. Currently, the export of steel products has fallen by 62%. About 65% of pre-war exports were carried out through seaports, which are currently blocked. Railway transportation can replace only a part of sea exports,” comments Stanislav Zinchenko, CEO of GMK Center.
As for post-war recovery, after the war, Ukrainian steel industry must be modernized according to modern environmental standards, agreed global trade stakeholders, strategic players and potential investors.
“The conclusion is more than comforting: the industry is capable of generating tens of billions of dollars of investment already in the coming years, and Ukraine’s huge potential in renewable energy and our iron ore reserves are the main prerequisites for green steel sector and the production of direct reduction iron and hot briquetted iron,” Oleksandr Hryban noted.
International end users present at the event confirmed their readiness to sign preliminary investment agreements. Strategic players see the great investment potential of the steel industry of Ukraine.
The series of round tables «Ukraine Industry Recovery Day», to which potential investors, financial donors, strategic players and stakeholders of each industry are invited, will be held in close cooperation with the Ministry of Economics. The first such event was organized in London by McKinsey and Systemiq. Steel industry was chosen as a pilot sector for discussion. The representatives of the British and French governments, the European Commission, as well as the financial and investment sector, including the specialized divisions of the EBRD, Black Rock, JP Morgan, Rothschild & Co and DIF were also present at the discussion.
At the end of 2022, the Russian Federation began shelling the energy infrastructure of Ukraine. The country’s industry lost the possibility of normal operation, because the power system generated significantly less electricity than was needed. Thus, steelmakers suspended work or significantly reduced production. At the beginning of 2023, the situation stabilized, steel plants began to restore suspended capacities and increase production.
However, in order to return to pre-war levels, the unblocking of the Black Sea seaports is necessary, since the domestic steel sector is export-oriented. Monthly losses of steel products exports from Ukraine due to blocking of ports, according to GMK Center estimates, reach $420 million.