Scrap collectors predict collection at the level of 1.2-1.25 million tons in 2023, and steelmakers need 1.9 million tons of scrap

Collection of ferrous scrap has been and remains an important factor in the work of Ukrainian steel industry. The military aggression of the Russian Federation against Ukraine had a strong impact on the work of Ukrainian steel enterprises and related industries. The dynamics of the decline in key indicators of the Ukrainian scrap market in 2022 amounted to 73-87% by 2021.

In 2023, the situation changed only in a decrease in the dynamics of the decline due to the low base of comparison after February 2022. In January-June 2023, collection of scrap decreased by 25.2% compared to the same period in 2022 – to 531 thousand tons. The supply of scrap to Ukrainian steel mills in the first half of the year decreased by 37.2% y/y – up to 413.8 thousand tons. Export of raw materials for this period amounted to 92 thousand tons, which is 3.2 times more y/y, and imports – 0.5 thousand tons (-68.8% y/y).

Market expectations can be seen in the draft Balance of scrap production and consumption in Ukraine for 2023. In particular, the document provides the following expected indicators:

  • scrap collection – 1.2-1.25 million tons (in 2022 – 997 thousand tons);
  • consumption of scrap by steel enterprises – 950-1000 thousand tons (896 thousand tons);
  • export of scrap – 180-200 thousand tons (53.6 thousand tons).

As the message of the association UAVtormet informs, the Balance was recommended for approval at a meeting of the relevant working group under the Ministry of Strategic Industries. It was attended by industry associations – UAVtormet, Uavtormetresurs, ALU, Ukrmetallurgprom, as well as industry experts and scientists.

Balance improvement

Compared to the beginning of 2023, the forecasts for the Ukrainian scrap collection market have been improved. In January 2023, UAvtormet predicted that scrap collection in Ukraine this year would amount to 900-950 thousand tons, and the supply of raw materials to steel plants – 800-820 thousand tons. The possible volume of scrap exports in 2023 was estimated at 50- 80 thousand tons

“Compared to January, the situation on the Ukrainian ferrous scrap market has changed significantly by the beginning of September this year. Steel plants began to increase steel production, consuming more and more scrap, the ArcelorMittal Kryvyi Rih Iron and Steel Works resumed purchasing imported scrap, and export deliveries increased. Accordingly, our forecasts have been adjusted,” Volodymyr Bubley, president of UAVtormet said in a comment for GMK Center.

Steelmakers against

For their part, steelmakers are dissatisfied with the quality of the draft balance sheet and the discrepancy between the figures given in the document and the real state of affairs.

According to the president of the association of enterprises Ukrmetallurgprom Olexandr Kalenkov, first of all, this project is not true. According to the calculations of Ukrmetallurgprom, in 2023 it is planned to produce about 6.2 million tons of steel (the balance sheet indicates the expected steel production at the level of 5.2-5.6 million tons), for which it is necessary to provide domestic steel enterprises with imported scrap in the amount 1.9 million tons

As for the volume of scrap collection, this issue is exclusively within the competence of scrap collection organizations, so Ukrmetallurgprom is not able to assess its real level in 2023. However, judging by the current dynamics, scrap collectors are not even close to the volume required for steelmakers.

“Consider for yourself: in the first half of 2023, steel enterprises of Ukraine produced 2828 thousand tons of steel, for which it was necessary to obtain 916 thousand tons of imported scrap. However, during this period, Ukrainian scrap collectors supplied only 557 thousand tons of scrap to steel enterprises, that is, 60.8% of the required volume. At the same time, 92 thousand tons of scrap were exported in the period January-June, which is 220.3% more than in January-June 2022 (28.7 thousand tons). That is, there is a significant shortage of scrap, which steel enterprises were forced to compensate from their own reserves, which to a large extent has already made it impossible to ensure the stable operation of the domestic steel industry,” Olexander Kalenkov said in a commentary for GMK Center.

According to him, taking into account the level of supply of imported scrap to steel industry for 6 months of 2023, it can be expected that the total deficit of scrap by the end of the year will be about 0.78 million tons, with all the ensuing consequences not only for the industry, but also for the economy of Ukraine.

“In general, in our opinion, given the current situation in the country, it is almost impossible to predict the exact volume of scrap consumption for a year. Therefore, we consider it necessary to intensify work on determining the balance of scrap consumption by steel enterprises of Ukraine after the victory, with the determination of the required volume for a period of at least three years or more, and also, in order to fully provide the domestic steel sector with strategic raw materials, introduce a temporary moratorium on the export of scrap until the end of hostilities and for a period of at least five years after our victory,” sums up Olexander Kalenkov.