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The Czech Republic supplies Ukraine with military goods and cars, but receives ore, cable and agro-products

After the start of Russian military aggression, the Czech Republic became an important partner for Ukraine in terms of military supplies and continued to be a traditional supplier of automotive equipment and consumer goods. And for Ukrainian mining companies, Czech steel mills have become even more important consumers of iron ore amid difficulties in exporting products to other regions.

Trade balance

Ukraine and the Czech Republic do not share a border, so trade and transit go through Poland and Slovakia. Imports from the Czech Republic in 2023 decreased by 55% – to 0.35 mln tons in physical terms compared to pre-war 2021, while in monetary terms they increased by 20% – to $1.8 bln. In turn, Ukrainian exports decreased by 21% – to 4.4 mln tons in physical terms over the same period, while in monetary terms they increased by 30% – to $1 bln.

In 2023, Ukrainian exports in physical terms exceeded imports from the Czech Republic 12 times, while in monetary terms they were 44% lower. This ratio indicates that Ukraine mainly supplies the Czech Republic with raw materials. The largest items of Ukrainian exports in 2023 were iron ore ($349 million or 85% of exports in physical terms), cable ($157 million), rapeseed ($32 million) and sugar ($20 million). There are also insignificant supplies of agro-products and foodstuffs, various industrial raw materials, wood products and consumer goods.

The largest items of imports from the Czech Republic are «other products» ($540 million), which can be understood as military goods, automobiles ($139 million) and auto bodies ($45 million), energy equipment ($56 million), cleaning ($42 million) and hygiene ($39 million) products.

In much smaller quantities, the country supplies Ukraine with plastic products, paper and cardboard, various industrial products and consumer goods, machinery, mechanisms and appliances.

Ukrainian iron and steel exports

Due to the loss of capacity and reduction of domestic production, Ukrainian exports of iron and steel products to the Czech Republic in 2023 compared to 2021 decreased by 24% – to 3.8 million tons, in monetary terms – by 48%, to $394 million.

Iron ore prevails in the structure of Ukrainian exports of iron and steel. Ukrainian iron ore exports to the Czech Republic last year fell to 3.8 million tons from 5 million tons in pre-war 2021. Over the same period, export revenues fell to $349 million from $616 million. Iron ore supplies to Czech steelmakers Liberty Ostrava and Trinecke Zelezarny are delivered by railroad, transiting Slovakia.

In the difficult years 2022-2023, when the possibility of product delivery to consumers was extremely limited, the Czech Republic supported Ukrainian iron ore producers with demand (even despite the decline in supplies). Since the beginning of the war, the Czech Republic’s share in the total volume of Ukrainian iron ore exports in monetary terms has grown from 9.7% to 19.7% in 2023. Only Slovakia was a larger consumer.

Since the beginning of the war, there has been an increase in supplies of pipes (2.3 times), wire rod (2.2 times) and steel wire (by 64%) to the Czech Republic. The export of rebar (HS 7214) grew practically from zero, which predetermined the record dynamics – a 34-fold increase, although the volume of supplies (4.2 thousand tons) looks rather modest. In turn, exports of flat cold-rolled and hot-rolled steel to the Czech Republic have fallen several times since the beginning of the war – to 4.8 thousand tons and 3.6 thousand tons, respectively.

Prospects for increasing exports of Ukrainian iron ore to the Czech Republic look partly uncertain amid difficulties in the work of the largest steel producer in the country – Liberty Ostrava (annual capacity – 3.6 million tons of steel). Like other Liberty Steel assets in Europe, the plant is experiencing difficulties – with large accumulated debts, it has not operated since the end of 2023 and is actually bankrupt.

In turn, the prospects for growth of supplies of Ukrainian steel products to the Czech market partially depend on the growth of its own production, as now the producers cannot even meet domestic demand for finished steel products. At the same time, the Czech Republic has a fairly high level of metal consumption (6.6 million tons in 2022).

Deliveries from the Czech Republic

The Czech steel industry is not going through the best of times. According to Worldsteel, steelmaking in the Czech Republic has been declining in 2022 and 2023 – by 11% y/y and 21% y/y – to 3.4 million tons. Czech steel production in 2023 is only 2.7% (3.1% in 2022) of the EU figure.

The overall decline in production also affects the country’s steel exports. Compared to pre-war 2021, Czech exports of iron and steel products to Ukraine in 2023 decreased by almost 90% – from 160 thousand tons to 19 thousand tons. Export revenues for the same period decreased to $25 million. The country did not take advantage of the deficit of metal products in Ukraine, which arose in the conditions of war, to increase supplies, as, for example, Poland did.

The only significant item of import of iron and steel products from the Czech Republic is coke (HS 2704), but its supplies to Ukraine have decreased from pre-war 154 thousand tons to 9.2 thousand tons in 2023. There are also insignificant supplies of rail products (3.5 thousand tons in 2023) and pipes (1 thousand tons). Due to the size of supplies, the importance of Czech steel products for the Ukrainian market is now minimal, although it may grow for the purposes of post-war recovery of the country.

Steel imports from the Czech Republic raise the problem of Ukraine’s regulation of access to steel products manufactured using Russian semi-finished products. At the moment, Ukraine, unlike the EU, does not restrict the entry of steel products made from Russian materials into its market in any way.

What next?

Under current conditions, the Czech Republic is a market for only a few types of Ukrainian export products (iron ore, cable and partly agricultural products). Trade between Ukraine and the Czech Republic is complicated by the poor capacity of transportation crossings on the border with Slovakia and the almost six-month blockade of border crossings on the border with Poland.