Ukraine cuts pig iron exports by a quarter in the first half of the year

In January-June 2024, Ukrainian steelmaking companies reduced exports of commercial pig iron by 25.1% compared to the same period in 2023, to 598.92 thousand tons. This is evidenced by data from the State Customs Service.

In June, exports of the relevant products amounted to 91.82 thousand tons, up 3% month-on-month and 45.8% less than in June 2023.

The main consumers of Ukrainian pig iron for 6 months are the United States, Italy and Poland – 451 thousand tons, 36.71 thousand tons and 29.9 thousand tons, respectively. In June, the United States imported 50.02 thousand tons of pig iron from Ukraine (-35.1% m/m), Italy – 5 thousand tons (not imported in May), Poland – 3.57 thousand tons (-44.4% m/m).

Ukraine’s pig iron exports have been gradually slowing since the beginning of 2024, falling by more than half in April compared to January. This was driven by an increase in domestic pig iron processing to produce value-added products, which is a priority. Steelmakers increased production amid the reopening of the sea export corridor, which allowed them to regain access to markets that had been key before the full-scale invasion.

At the same time, shipments of pig iron abroad began to grow again in May, indicating a deterioration in the industry and a decline in demand for finished products. In particular, in June, output of rolled products fell by 3.9% m/m – to 572 thousand tons, pig iron – by 3.8% m/m, to 629 thousand tons, and steel – by 0.4% m/m, to 735 thousand tons.

The deterioration in the industry’s performance is the result of pressure from a number of factors, including declining demand for products, problems with energy supply, shortage of personnel due to mobilization, etc.

In particular, on June 1, 2024, CMU Resolution No. 661 amended the Regulation on the Peculiarities of Electricity Imports under the Legal Regime of Martial Law in Ukraine, which obliges Ukrainian producers to buy at least 80% of electricity from the EU at the European price to avoid forced electricity supply restrictions. Previously, the mandatory share of imports was 30%.

This decision of the Ukrainian government may lead to numerous negative consequences for domestic energy-dependent industrial companies, especially iron ore producers and metallurgists. For example, the share of electricity in the production of iron ore concentrate is 60%, pellets – 32%, steel products in electric arc furnaces – 24%, blast furnaces and converters – 3.5%.

Rising electricity costs are leading to a sharp rise in production costs, making it uneconomic to continue production, and some mining and metals companies warn that this could lead to a complete shutdown. In general, the restriction of electricity supplies will inevitably lead to a significant decline in production and exports.

Revenue from pig iron exports in January-June 2024 decreased by 26.9% compared to the same period in 2023 to $226 million. In June, it amounted to $36.4 million, down 44.2% y/y and 5.3% m/m.

As GMK Center reported earlier, in 2023, Ukraine reduced pig iron exports by 5.8% compared to 2022, to 1.25 million tons. Compared to the pre-war year of 2021, pig iron shipments abroad decreased by 61.4%, or 1.99 million tons. Export revenues of domestic enterprises decreased by 26.2% y/y – to $471.5 million.

Poland was the largest consumer of Ukrainian pig iron in 2023, accounting for 51.9% in monetary terms. Spain accounted for 21.4% of export shipments and the United States for 13.1%.

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