Why scrap metal collection is declining in Ukraine: key factors

The debate surrounding the scrap market in Ukraine has intensified sharply in recent times. Industry representatives are sounding the alarm, calling on the government to intervene, and searching for those to blame.

However, if we examine the situation systematically and objectively, it becomes clear that the problem runs much deeper and is structural in nature. I propose to examine the reasons for the decline in scrap collection volumes in Ukraine in the first quarter of 2026, taking into account the domestic, European, and global context.

15 years of systemic decline

The key point to understand is that the scrap market in Ukraine has been in crisis for over 15 years. The reason is simple—insufficient generation of new scrap from key sources: industry and construction. In Ukraine, the share of scrap from the machine-building sector is minimal and continues to decline—over the past 30 years, industrial production has fallen by 80%.

New construction infrastructure projects? Investment in new infrastructure remained chronically low even before the full-scale war.

For the past 30 years, the key source of scrap for the industry has been deindustrialization—the dismantling of enterprises that went bankrupt or closed down. But we all understand that this is not a stable source and is very sad and negative.

As a result, even before 2022, the volume of scrap collection and procurement in Ukraine had shrunk to about 4 million tons per year.

Structural problems exacerbated by war

Full-scale war has drastically worsened the situation. Up to 60% of the country’s industrial scrap sources were located in the southeastern industrial regions—precisely where active hostilities are currently taking place or where areas are partially or completely outside government control. Furthermore, the nature of modern warfare has expanded the zone where it is unsafe to conduct any industrial activity to 100–200 km from the front line.

As a result, we face complicated logistics, lost scrap collection regions, and yet another decline in business activity. In 2022–2025, collection volumes stabilized at just 1.5–2 million tons per year—effectively half the pre-war level.

Why did collection decline specifically in the first quarter of 2026?

Let’s try to understand the reasons behind the latest decline in scrap collection volumes, particularly in the first three months of 2026. Among them, I would highlight the following:

1. Power outages

In January–February 2026, the situation in Ukraine’s energy sector was one of the worst since the full-scale war began. Power outages brought scrap collection sites to a standstill and halted people’s physical activities.

2. Weather conditions

Scrap collection operations in Ukraine always slow down in the winter. Moreover, the winter of 2025–2026 was one of the coldest in recent years. The collection, sorting, and transportation of scrap become physically more difficult at low temperatures.

Here we have a very telling practical example involving scrap collection in Kyiv. So, as early as Q1 2025, scrap collection and shipments in the capital had already fallen by 10,000 tons compared to Q1 2024, down to 26,600 tons. And what do we see next: by Q1 2026, this figure had dropped again by 6,600 tons compared to Q1 2025, down to about 20,000 tons.

And this case confirms not only local short-term factors such as blackouts and temperatures, which negatively affect scrap collection. It clearly demonstrates a systemic shortage of scrap in Ukraine, meaning that collection is declining in any case and without significant seasonal influences.

3. Intensity of hostilities

The increase in shelling and air raid alerts directly impacts business activity—work effectively comes to a halt during alerts. This past winter was marked by a high intensity of attacks across all regions of Ukraine.

4. Mobilization

This process is actively ongoing and is removing a significant number of employees from businesses. The reduction in the workforce is particularly critical for an industry where a significant portion of processes involves physical labor.

European experience

It is important to understand that the seasonal decline in accumulated scrap volumes at the beginning of the year is a global industry-wide market factor.

According to Recycling Europe, the following factors affect scrap collection and sorting processes in winter:

• frozen ground and precipitation—scrap is stored outdoors, so adverse weather conditions prevent it from being sorted and loaded;
• short daylight hours—reducing work shifts at open-air sites;
• increased safety requirements when working with mechanized equipment—for example, work on icy surfaces or snow is dangerous and therefore prohibited.

General trends

Why are scrap collection volumes traditionally lower worldwide in January, February, and March? First, this is because the construction industry—one of the key suppliers of this raw material (rebar scraps, components from old buildings)—virtually comes to a standstill. This is linked, in particular, to the weather and temperature. The pattern is such that the construction sector always experiences a downturn during the winter months.

Second, the pace of demolition of old buildings slows down in January and February. That is why there is no scrap supply from this activity.

Let’s also not forget about the so-called Christmas and New Year’s holidays. They cause business activity to drop to nearly zero in the first half of January.

In addition, many countries around the world see weaker demand for scrap in January and February, which also does not encourage its systematic collection. What are the reasons for this:

• Automotive and machine-building companies close their fiscal year in December and carry out maintenance and line upgrades at the beginning of the following year—this often reduces the volume of scrap generated;
• Companies typically build up inventories and stock their warehouses with scrap in the fall, and by the end of the year, they strive to maximize the use of their financial resources allocated for the current year; therefore, they do not actively purchase scrap at the beginning of the year;
• At the start of the new year, manufacturers act more cautiously due to uncertainty about the future market configuration caused by unpredictable factors, so production volumes are lower, and the generation and consumption of scrap are also lower.

Therefore, in January and February, scrap buyers, when viewed from the perspective of consumption, are always less active. As a result, the market simultaneously faces both lower supply and weaker demand.

As we can see, there are a number of factors—including purely Ukrainian, industry-specific, cyclical, and macroeconomic ones—that explain why the physical collection of scrap in Ukraine decreased in the first quarter of 2026.

Are there really problems in the market?

Despite all the challenges, I believe it is entirely inaccurate to speak of a market catastrophe. A telling example is Ukrainian Railways. In the first quarter, the state-owned company achieved an unprecedented sales figure of 21,600 tons per month, whereas from May to December 2025, it averaged only 9,950 tons per month. In other words, the growth rate increased by a factor of 2.17! In other words, in the first quarter of this year, UZ sold approximately 35% of the annual scrap volume for 2025 or 67% of all sales in 2021. According to Ukrainian Railways’ estimates, the company has already successfully streamlined its processes and is capable of consistently supplying large volumes of scrap.

From this, we can conclude that the market is functioning and there is no catastrophic situation. Yes, there is a seasonal cycle, which was particularly affected by the severe energy crisis in January–February, linked to power outages, active hostilities, and other factors listed above. But steel companies on one hand and the state-owned Ukrainian Railways on the other have set a fine example of cooperation and the circular economy!

What are the immediate prospects?

Trends in the scrap market depend primarily on the availability of international financial aid, as this has been the key driver of overall economic activity in our country over the past three years.

If the level of international financial aid remains high and support from the European Union and international organizations continues, then construction and infrastructure activity will pick up. Industry will also become more active. Then we will see a seasonal increase in scrap collection in Ukraine.

However, the fundamental problems affecting the generation and collection of scrap will remain:

• a decline in the industrial and construction sectors;
• economic contraction;
• labor shortages;
• active hostilities and associated war risks.

In my opinion, the scrap market in Ukraine is not experiencing a sudden crisis—it is in a state of prolonged systemic stagnation caused by macroeconomic factors and deindustrialization. Therefore, given all these negative factors, one should not expect the industry to collect 2.5 million tons of scrap in the fifth year of the war. Without economic recovery, investment in construction and industry, and growth in the machine-building sector, we should not expect significant growth in the generation and collection of scrap.