The decline in the rolled steel market was 35–45% in Q1

The rolled steel market faced dual pressures at the start of 2026: a sharp drop in demand was accompanied by a steep rise in logistics costs. Significant inventories of metal products in warehouses and energy constraints forced operators to operate under conditions of fierce competition and low margins. However, the expected international financing for major recovery projects offers hope for stabilization. Serhiy Kovalenko, Commercial Director of Vartis, analyzes the results of the first quarter and shares his forecasts for the rest of the year.

First quarter results

The rolled metal market in 2026 demonstrates a high degree of dependence not so much on consumption levels as on access to financing for major infrastructure and recovery projects. The first quarter clearly confirmed this. VARTIS’s sales results were disappointing: there was a significant shortfall in planned targets, particularly in January and February. For the entire period since 2022, these months have been among the weakest in terms of sales.

The sharpest drop in demand was observed in central Ukraine and in Kyiv, while western regions partially supported the market thanks to residential construction. According to our estimates, the decline in the rolled metal market in the first quarter of 2026 amounted to 35–45% compared to the same period in 2025 (depending on the region and segment).

The main factors were:

• prolonged power outages;
• weather conditions that limited construction site operations;
• lack of funding for major infrastructure projects, particularly in the energy sector.

Supply and demand trends

In the first quarter, supply significantly exceeded demand. At the end of last year, most metal trading companies built up substantial inventories in anticipation of strong consumption. However, due to a sharp drop in demand, these volumes effectively oversaturated the market and led to a surplus.

There was no shortage of metal products, particularly imported ones. On the contrary, import volumes remained high despite the challenging logistics situation.

Market pricing

In a surplus environment, the market operates under intense competition. This leads to falling prices, increased dumping, and, as a result, a decline in operators’ margins. Thus, even with metal availability, the market is under significant price pressure.

Logistics and costs

Since late February, there has been an increase in logistics costs for both international shipments and domestic transport. Estimates indicate that logistics costs rose by 15–20% in the first quarter. By April, this negative trend had intensified—costs had increased to 40–50% compared to the start of the year. This is due to rising fuel prices, more complicated routes, and general operating conditions for transport.

As a result, these costs affect the cost of goods and are partially passed on to the end consumer. The market is simultaneously under dual pressure: a significant drop in demand and prices on one hand, and a sharp rise in costs on the other.

Market segments driving demand

The construction sector remained the main driver of demand in the first quarter—primarily residential construction and, to a lesser extent, tourism infrastructure projects in the western regions. The most active regions were Lviv, Ivano-Frankivsk, and Zakarpattia. The sharpest decline was observed in segments related to infrastructure construction and large-scale projects.

Demand in the infrastructure sector

In the first quarter, demand in the infrastructure construction and renovation sector remained minimal for two reasons:

1. Lack of government funding.
2. A significant number of projects have been put on hold due to energy constraints and weather conditions.

At the same time, the market is in a wait-and-see phase. With the arrival of planned funding from Europe (approximately €90 billion for 2026–2027), an increase in demand for rolled metal products is expected for:

• reinforcements and fortifications;
• energy protection facilities;
• restoration of thermal power infrastructure.

Approximately UAH 11 billion in funding is allocated for these areas this year. An active phase of demand is expected in the second half of the second quarter and throughout the third quarter.

Forecast for the rest of the year

According to the baseline forecast, rolled steel consumption in 2026 will remain roughly at last year’s level. No significant growth is expected, as access to financing remains the key factor.

The main areas of consumption will continue to be:

• energy infrastructure protection and restoration;
• construction of shelters;
• construction and fortification of defensive lines.

The rolled metal market in 2026 is in a wait-and-see phase: growth potential exists, but its realization directly depends on the launch of major infrastructure projects and stable financing.