Steel production in Ukraine may grow by 16% in 2024

Limiting factors – military threats, shortages of electricity and personnel, as well as negative decisions of government agencies

Despite numerous problems with logistics and staffing, as well as power shortages, Ukrainian steelmakers are gradually increasing production volumes. In seven months, steelmaking has increased by 34%, and capacity utilization has increased to 49% from 37% in the same period of 2023. In total, the steelmakers plan to increase steelmaking by 1 million tons – to 7.2 million tons by the end of this year.

Current results

The results of the activities of the domestic steel industry for January-July of this year are as follows:

• pig iron production – 4.09 million tons, or 21.2% more than the same period in 2023;
• steel production – 4.58 million tons (+33.6%);
• rolled product output – 3.73 million tons (+28.4%).

We observe a trend towards gradual increase in production volumes, which inspires a certain optimism.

In terms of capacity utilization in steelmaking, this indicator ranges from 25% to 73% depending on the company. The average utilization rate for the industry is approximately 49%. In comparison, steelmaking capacity utilization for the same period in 2023 ranged from 12% to 70% with an industry average of approximately 37%. Thus, despite constant shelling by the aggressor country, steelmakers have increased capacity utilization.

Factors of influence

The work of the industry’s enterprises is influenced by many factors. First of all, of course, these are military risks – almost all steel enterprises are located either directly in the front line or in an area where missiles can arrive at any moment.

Most of the other factors are derived from the war factor:

• frequent interruptions in power supply to enterprises due to the destruction of power infrastructure, which has an extremely negative impact on production performance;
• limited logistics due to the reduced capacity of rail, road and sea transportation systems;
• personnel hunger, caused both by the outflow of specialists abroad in the first months of the war and by many of them joining the AFU and territorial defense, including as a result of mobilization processes that have not yet been sufficiently streamlined.

At the same time, we are constantly confronted with the negative consequences of decisions (or lack of decisions) of government agencies that are not directly related to the war factor. For example, the issue of access to railway scrap metal has not yet been resolved, not all enterprises of the industry are able to “pull” 80% of electricity imports for uninterrupted power supply, the NEURC again raises the issue of unification of classes of electricity users, etc. The issue of unification of classes of electricity users has not been resolved yet. For its part, the Ukrmetalurgprom together with other industry associations is always trying to resist such processes – unfortunately, not always successfully, but we do not intend to retreat.

End of year estimates

If the overall situation does not deteriorate (which we all hope for), we can expect to produce at least 7.2 million tons of steel in 2024. For comparison, we finished 2023 with 6.2 million tons of steel. In other words, the possible growth will be about 16%.

In turn, due to the increase in reconstruction work on destroyed infrastructure facilities and construction of fortifications, I think we should expect a certain increase in the capacity of the domestic market. This may happen both due to the increase in the volume of domestic production of rolled metal products, and due to imports, firstly, of the assortment, the production of which in Ukraine is either absent or insufficient. So far, it is difficult to speak about any specific forecasts for the end of the year. Nevertheless, there is a tendency to increase domestic consumption of steel products.