Ukrainian Railways has canceled a number of pre-war scrap auctions

Ukrainian Railways (UZ) has canceled auctions for the sale of scrap on the Prozorro.Sale platform, which were held in early February 2022 but were frozen with the start of the Russian invasion. This is stated in the decision of the Department of Property Policy of Ukrainian Railways, the text of which is available to the editorial board.

«Due to the occurrence of force majeure circumstances that led to a violation of the terms of the auctions, the loss of the property that is the subject of the auctions, taking into account the winners’ requests for their cancellation and the explanations of the administrator of Prozorro. Sale, based on the decision taken by the Commission of Ukrainian Railways on the procurement and use of ferrous and non-ferrous scrap metal dated 16.04.2024 to cancel the electronic auctions announced in Prozorro.Sale in accordance with the decision of the Board of JSC “Ukrzaliznytsia”, the document says.

In particular, 50 lots for the sale of scrap with a total volume of 33.8 thousand tons for a total amount of almost UAH 292.5 million are canceled.

Earlier, Yevhen Shramko, a member of the board of Ukrainian Railways, said that the company would decide by the end of April 2024 to unblock or cancel the scrap metal auctions held in the Prozorro.Sale system before the full-scale Russian invasion in February 2022.

Ukrainian Railways stopped selling scrap in the fall of 2023 due to alleged bureaucratic obstacles in the regulatory framework. Ukrainian metallurgists, the main consumers of scrap in the domestic market, have repeatedly called on UZ to resume such auctions due to the urgent need for raw materials to increase production. At the end of February 2024, Yevhen Liashchenko, Chairman of the Board of UZ, assured that the company was ready to resume selling scrap on Prozorro.Sales in the amount of 20 thousand tons per month, but this has not happened yet.

As GMK Center reported earlier, in 2023, Ukrainian Railways successfully held 101 scrap auctions with a volume of 76.39 kt and a total value of UAH 460.11 million. Compared to 2022, sales of raw materials decreased by 32.4% and revenue – by 31.3%. The extent to which the company has fulfilled its auction commitments is unknown.

UZ’s withdrawal from the scrap metal market will have a negative impact on the Ukrainian steel industry, as the railroad operator is the main source of raw materials for the market. At the same time, the collection of raw materials from alternative sources is complicated due to the hostilities, as most scrap procurement companies were located in the temporarily occupied territories or in the war zone before the full-scale war.

An additional negative factor is the unimpeded export of this raw material. In particular, in January-April 2024, scrap collection in Ukraine amounted to 563.4 thousand tons, supplies to domestic steelmakers – 446 thousand tons, and exports – 87.4 thousand tons. This means that 15.5% of the raw materials harvested are exported without paying any duty to the state budget.

As domestic steelmakers increase production volumes, the industry may face a shortage of scrap, a raw material that is strategic for achieving carbon neutrality and industry operations.