Ukrainian steelmakers did not appeal to UZ to cancel scrap auctions – UMP

Ukrmetalurgprom (UMP), the authorized representative of the Ukrainian iron and steel industry, denies the information spread in the media that steel plants allegedly applied to Ukrainian Railways (UZ) to cancel the scrap auctions held in early February 2022.

«None of the Ukrainian steel enterprises, including those that were recognized as winners of a number of scrap auctions, applied to Ukrainian Railways to cancel them. This information is not true. On the contrary, Ukrainian steelmakers are very interested in scrap metal originating from Ukrainian Railways and are waiting for the resumption of sales of raw materials, which were suspended last fall,» the statement said.

According to Oleksandr Kalenkov, president of Ukrmetalurgprom, Ukrainian steel mills have been waiting for UZ’s decision on these frozen auctions for two years. The companies paid a deposit of several million hryvnias, signed all the contracts and sent them to Ukrainian Railways, meaning they were ready to buy the raw materials. However, the company refused to ship the scrap.

«In general, there is a paradoxical situation: the need for scrap is growing, Ukrainian Railways can have additional income, but it makes an anti-state decision to cancel the auctions that have already been held. It is difficult to understand the actions of UZ management. The end consumers of scrap, Ukrainian steelmakers, are ready to buy raw materials from Ukrainian Railways, and we need them to increase production. Therefore, the information that the steel mills themselves allegedly asked UZ to cancel the auctions is not true,» Kalenkov emphasized.

It was recently reported that Ukrainian Railways canceled the scrap auctions on Prozorro.Sale, which were held in early February 2022 but were frozen with the start of the Russian invasion. 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.

UZ stopped selling scrap through Prozorro.Sale in the fall of 2023 due to alleged bureaucratic obstacles in the regulatory framework. Ukrainian steelmakers, 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, UZ CEO Yevhen Lyashchenko 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.

UZ’s withdrawal from the scrap market has a negative impact on Ukraine’s 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 metal 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 metal, a raw material that is strategic for achieving carbon neutrality and industry operations.