The EU’s new quota system could destroy Ukraine’s steel industry – Metinvest CEO

New EU restrictions on steel imports could devastate Ukraine’s industry and deal a severe blow to the budget of a country defending itself against Russian invasion. This was stated by Yuriy Ryzhenkov, CEO of the Metinvest Group, according to The Guardian.

According to him, the bloc’s new protective measures, due to come into force on 1 July, could “kill the Ukrainian steel industry”.

As the publication notes, the EU’s decision has sparked a race among the bloc’s trading partners, who are trying to secure a sufficiently large share of quotas for their steelmakers. This also applies to the UK, where industry representatives have warned of an “existential threat” should they not gain sufficient access to their largest export market.

For Ukraine, the economic threat is exacerbated by the war, which has cut off some of its previous alternative markets and pushed the country’s steel companies towards closer integration with Europe. The Ukrainian steel industry has also faced additional costs due to ongoing attacks on infrastructure since the start of Russia’s full-scale invasion in February 2022.

“In our view, this is an unfair approach. Ukraine does not pose a significant threat to the EU steel industry. It is simply not large enough,” noted Yuriy Ryzhenkov.

He added that destroying one of Ukraine’s existing industrial sectors seems unwise.

“We see no leniency towards Ukraine,” emphasised Metinvest’s CEO.

Ukrainian steelmakers argue that the quotas will also hamper the war effort by depriving the government of tax revenues equivalent to hundreds of millions of pounds sterling. Metinvest is considered the largest taxpayer in the country’s private sector.

The quotas will be imposed on the carbon tax as part of the Carbon Border Adjustment Mechanism (CBAM). According to Yuriy Ryzhenkov, due to the war, Metinvest was unable to invest billions of euros – the cost of modernising the group’s two plants – in cleaner electric arc furnaces. The company had planned to do so before the full-scale Russian invasion.

The group’s two steelworks in Zaporizhzhia and Kamianske are operating at approximately three-quarters and two-thirds of their capacity, respectively.

The company faces regular damage to the railways used to transport its products, as well as an unstable electricity supply following systematic Russian attacks on Ukraine’s power grid. The group has installed its own generators to enable a quicker resumption of operations following power cuts. Furthermore, Metinvest has lost several key assets due to the hostilities.

It should be recalled that Ukrainian steel producers and officials had previously warned that the EU’s plan to halve steel import quotas would harm Ukraine, which is attempting to fund its defence in the face of Russian aggression. This was reported in the Financial Times. The bloc’s new protective measures could cost the country up to €1 billion in export revenue.