GMK Center’s 2026 Forecast: Iron & Steel

Crude steel output in Ukraine may drop 4-5% in 2025. Negative global market conditions have led to a decline in exports, but support has come from the domestic market, which has shown strong dynamics in 2025. The results of the next year are difficult to predict due to high uncertainty and a range of critical risks. However, in the context of expanding Chinese exports and strengthening trade restrictions, growth for the steel industry can only be ensured by developing the domestic market.

Ceiling Reached

In 2025, the fourth year of the war in Ukraine, steel companies may preliminarily reduce steel output to 7.2-7.3 million tonnes from 7.6 million tonnes last year. This marks the first significant production decline since the start of the Russian invasion. Stabilization was observed in 2023, and 2024 showed recovery growth. But the 2025 dynamics indicate the industry has hit its ceiling under current conditions.

At the end of last year, GMK Center`s forecast predicted a 9% drop in steel output to 6.8 million tonnes due to risks such as the need to import coking coal after mining halted in Pokrovsk, falling prices for scrap and semi-finished products on the global market, high energy prices and supply issues, and the negative impact of US and EU trade restrictions. All these factors have manifested their negative influence throughout the year – Ukraine’s steel exports for January-November 2025 fell by 4% year-on-year.

Export

2025 was a challenging year for steel exports. Aggressive Chinese exports, which grew by 13% over 10 months this year, led to falling prices on global markets. For instance, export prices for flat rolled products from Turkiye fell by 10%, and for rebar by 6%. This put colossal pressure on Ukrainian steel producers, already struggling with competitiveness on global markets due to high energy, logistics, and imported coal costs.

As expected, Ukraine’s exports of semi-finished products plummeted by 31%. The growth in semi-finished product exports was the main factor behind the increase in steel output in 2024. In 2025, the price environment for the square billet market deteriorated alongside falling scrap prices, which had supported semi-finished product prices. Moreover, China found a new export model amid intensified trade restrictions by increasing billet exports, which more than doubled to 12 million tonnes. As a result, Ukrainian producers were forced to leave MENA and South American markets, meaning a loss of 400,000 tonnes of exports. Exports of billets to Bulgaria also fell by 120,000 tonnes, likely due to production factors against a backdrop of a weakening EU market, the imposition of a 50% import tariff in the US, and anti-dumping measures against rebar in Canada.

This situation limits the range of available export markets for Ukraine – increasing the importance of the European market for domestic companies. At first glance, Ukraine’s steel exports to the EU remained unchanged this year. However, exports of finished steel products to the EU grew by 17% year-on-year for January-November. Consequently, Ukraine’s dependence on the EU market has grown to a critical level. The EU market’s share in finished steel product exports for the first 11 months of 2025 reached 81%, or 78% for all steel including semi-finished products. Why is this important? The EU is currently undergoing a policy transformation, strengthening the role of regulations, including CBAM, import quotas, etc. Any regulatory decision by European authorities could have an extremely painful impact on domestic steel production.

Pig iron exports in 2025 grew by 49%, driven by increased shipments to the US, where Ukraine is the second largest import supplier after Brazil. The hike in US steel import tariffs to 50% shook the market, allowing for an increase in Ukrainian pig iron exports despite a 10% import duty. The US market accounts for 74% of Ukraine’s pig iron exports. Pig iron shipments to the EU market remained unchanged. While cheap Russian pig iron remained present on the European market, domestic products struggle to attract buyers’ attention.

Domestic Market

The domestic market provided some support to Ukrainian steel producers in 2025, preliminarily expected to grow by 10-12% to 3.6-3.7 million tonnes. The market likely received an impulse from the activation of defensive fortification construction and increased demand from the defense industry. Although initially skeptical about the domestic market in 2024, seeing defense projects as one-off.

However, of the 300-400 thousand tonne growth in local steel consumption, Ukrainian producers managed to supply only a portion – 100-200 thousand tonnes, with the remaining 200 thousand tonnes met by increased imports (+20%).

Operational Constraints

Reduced steel output was also due to production factors. In May-June, a major overhaul of blast furnace No.9 at Kametstal was carried out along with a major overhaul of converter No.1. Interpipe did not produce steel from May due to an electric furnace transformer failure, with resumption expected only in November.

Overall, the capacity utilization of operational facilities in Ukraine remained quite high in 2025 at over 80%. Thus, there is practically no reserve for increasing output next year. A return to 2024 steel output levels is technically possible after restarting equipment repaired this year. However, we see a number of market constraints and significant risks that will limit Ukraine’s

Challenges and Risks for 2026

CBAM is the primary challenge for all steel exporters to the EU. However, CBAM has already negatively impacted Ukrainian exports, as Q1 2026 sales commenced a month ago, while the draft CBAM parameters were only published on 17 December.

In the draft regulation, the default carbon intensity values are set so high that operators can only work using actual emissions data. The latter presents a problem, as actual data require verification, which for 2026 results will only be available in 2027. Consequently, high uncertainty has already deterred European buyers from imports. CBAM has already acted as a technical barrier, effectively restricting imports, including those from Ukraine.

Ukraine is seeking a recommendation for temporary exemption from CBAM, citing the force majeure clause, which undoubtedly applies due to the Russian invasion. If European authorities do not accept the Ukrainian side’s arguments and Ukraine fails to secure an exemption, it would deal a severe blow to the local steel industry, given its high dependence on the EU market. Due to CBAM, we anticipate that Ukraine could lose exports of long products and square billets to the EU within the next couple of years, along with a portion of its pig iron exports. This would likely lead to the closure of two or three out of the seven blast furnaces currently in operation.

Starting July, the EU will launch a new, much stricter system of Tariff Rate Quotas (TRQs). Imports into the EU are expected to fall by 40-50% year-on-year as a result. The European Commission’s draft regulation provides for Ukraine’s special status as an EU candidate country and a nation suffering from war consequences. However, vague wording states these factors should be considered without undermining the effectiveness of the safeguard measure itself. It appears a special approach for Ukraine is envisaged. But the design remains subject to negotiation and carries risks. If quotas are imposed on Ukraine, it could pose critical risks for the domestic industry, given the high dependence on the EU market.

EU steel output may grow by 13-14% in 2026 to meet additional supply needs due to reduced imports. This could mean increased demand and possible price growth for pig iron. A significant positive is the EU’s refusal to import Russian pig iron from 2026, creating additional demand of 700,000 tonnes. Thus, the attractiveness of the European pig iron market may increase. However, whether Ukrainian producers can benefit from this remains an open question. Exporters from Brazil, the main competitor in the US market, are actively looking at the EU market. Brazil and several other countries have low default carbon intensity values, which could reshape the EU pig iron market within the next 5 years.

Expanding the geography of Ukrainian steel exports to other regions seems unlikely next year. Although China announced the start of a steel export licensing procedure from January 2026, in our view, this will initially function as a control method rather than a restriction. Chinese steel exports will likely remain high next year, above 100 million tonnes. Facing problems with high energy, logistics, and imported coal costs, Ukrainian exporters will lose out to Chinese or Russian competitors in markets like MENA, Turkiye, and others requiring sea shipments.

The competitiveness of Ukrainian metallurgical companies will again be under pressure in 2026 due to active Russian attacks on energy and port infrastructure. Currently, Black Sea supply prospects are questionable. Electricity supply is limited, and its price exceeds that in neighboring EU countries by 30%.

2026 Forecast

Thus, assessing the prospects for domestic steel companies in 2026, we see risks of reduced shipments to the EU. Expanding exports to other regions is unlikely due to weak market conditions and the loss of Ukrainian producers’ price competitiveness. Main hopes rest on the domestic market, which could show 5-10% growth, driven either by new defence projects or reconstruction initiatives should the war end.

Therefore, GMK Centre estimates possible steel output in 2026 at 7.2mn t (base-case scenario), implying neutral dynamics compared with 2025. This represents the output ceiling under current conditions.

An output increase is only possible by restarting equipment idled since 2022, which would require significant overhauls and multi-million dollar investments. But for this to happen, an end to the war is necessary first, and favourable market conditions are absent second. Consequently, an optimistic scenario envisages only a return to 2024 levels – 7.6mn t.

A pessimistic scenario would see output drop to levels close to 2023 – 6.3-6.6mn t, should steel exports to the EU be restricted by CBAM and TRQs, sea logistics remain blocked for an extended period, and the domestic market fail to meet expectations. But these are systemic factors, and should they materialise, they would imply long-term industry stagnation.