Are those investments stable and can they be relied on in the future?

GMK Center presents the very first comprehensive study of investment contribution to the Ukrainian economy and the mining & metals as its largest sector. For decades, companies of the sector have been releasing products, providing jobs, paying taxes, financing social projects in their regions of presence, and in no small way investing to survive in the future.

Investments create new possibilities. Possibilities for growth and development. It is crucial whether the investment volumes are permanent and how much they can be reckoned on in the future. Mining & metals companies are a unique case. Considering the specific nature of their operation, their investments are stable; the sector accounts for appx. 10% of the total volume of capital investment in Ukraine.

Mining & metals companies support the country’s macroeconomic stability more than any other business. We can see this from changes in Ukraine’s GDP, which decreases in parallel with a drop in capital investment by mining & metals companies. Today’s amount of investment by mining & metals companies defines tomorrow’s output of mechanical engineering companies, the volume of transported cargo and the volume of electricity transmitted via power grids.

In spite of all the difficulties and volatility of the total investments in mining & metals sector, we can see a positive trend, i.e. the amount of investment per ton of steel and iron ore concentrate is gradually increasing. It means that the sector recognizes its prospects and is ready to further support the Ukrainian economy.

This economy is certainly going to change in the framework of green energy transition. However, this requires green (i.e. zero carbon footprint) steel. That’s why mining & metals companies are already setting the stage for production of such steel.

This study is prepared in partnership with the Interpipe Group, one of the largest investors in the Ukrainian industry. Interpipe has managed to implement a unique project — they built an EAF mill from ground zero. The Company’s investment in this context is an example for the global steel industry and a major environmental investment in Ukraine as the new Interpipe Steel plant features environmental indicators on a par with the world’s best practices.

However, few onlookers care to muse upon problems and obstacles faced by steelmaking companies in Ukraine and at what cost those investments come by. Ukrainian mining & metals companies depend on movements in product prices. And even more so than their direct competitors from Russia, Turkey, and the EU, as Ukrainian manufacturers have no access to cheap external funding and are therefore forced to count solely on their own resources. Thus, investment volumes in the sector directly depend on revenues.

Considering the system-level significance of Ukraine’s mining & metals sector, its investment activity should be facilitated by the government. Public institutions in the U.S., Canada, Australia, and the EU countries allocate funds to investment projects in the mining & metals sector directly (through grants, soft loans, interest rate compensations etc.). Ukraine has no comprehensive policy on encouraging investments in the mining & metals sector. We hope introduction of such a policy is a prospect for the nearest future and our study is here to aid by laying a groundwork for public and expert discussions.