Ownerless millions underfoot: how the Ukrainian scrap metal market ended up in a deep knockdown
Musa Magomedov, member of the Parliament of Ukraine, member of the Verkhovna Rada Committee on Economic Development
Tens of thousands of tons of Russian scrap metal, which arrived in our country in February last year as tanks and guns, cause a feeling of disgust in many Ukrainians. At the same time, the question arises: what to do with this rubbish? Hostile equipment and damaged infrastructure are the raw materials that make up the metal fund of our state. Raw materials are products that the country badly needs during a war. But why is the amount of scrap reduced, and enterprises stop?
According to the results of March 2023, Ukraine collected 23% less ferrous scrap compared to February. 70.4 thousand tons against 91.5 thousand tons of raw materials. Such data provided by the association UAvtormet. If we compare the first quarter of 2023 and the same period of 2022, the reduction is 60%. For an ordinary Ukrainian who is not familiar with the industry, these figures mean little and can be extremely confusing. But objectively, everything is on the surface.
To understand this issue, let's look at the state of the industry in the last pre-war year. Then, in the first 7 months of 2021, almost 10 times more scrap metal was exported from Ukraine than in the entire 2020 - 335 thousand tons. This was the harbinger of a crisis. Scrap prices abroad rose to $500 per ton, while the export duty was only $58. At the same time, Ukrainian metallurgical enterprises faced the threat of a complete shutdown.
A month after the full-scale invasion of Russians in Ukraine in March 2022, the issue of scrap metal has again been updated. A huge number of destroyed enterprises and tons of enemy equipment turned out to be practically under our feet on our territory. It would seem that the shortage of scrap metal in the mining and metallurgical complex should have slightly decreased, but everything happened the other way around. But why?
The shortage of raw materials was exacerbated by the occupation of the eastern regions. Production volumes decreased by 75%. But exports for the first three months of 2023 amounted to about 40 thousand tons. While in October-December 2022, about 16 thousand tons. If the pace of exports continues to grow, then in December we will reach 300,000 tons. In other words, we export more than we can provide for ourselves.
In 2021, according to experts, the maximum supply of scrap metal per year could be 7-8 million tons. Now the market cannot collect even a million. Therefore, the gap between exports and receipts becomes catastrophic.
Unfortunately, the scrap metal market itself is currently an extremely non-transparent process. This is the only thing that supporters and opponents of a temporary ban on the export of scrap metal agree on. Export supporters argue that by selling scrap abroad, the activity of small businesses helps to restore the economy. And the disposal of enemy equipment and destroyed objects preserve the environment. Of course, destroyed and burned industrial facilities, and the remains of destroyed military equipment pose a threat to the environment and people living nearby.
The export of scrap has led to the temporary shutdown of some enterprises, criminal schemes, and shortfalls in budget funds.
In 2021, mining and metallurgical complex enterprises paid over UAH 42 billion to the budget. Let's see how much the state gets when it exports scrap metal. It's amazing, but almost nothing. After all, raw materials are exported through the EU, where there is a preferential export duty of 3 euros. From there it is redirected to real customers.
So, at a time when ordinary Ukrainians are raising money for military equipment, funds from which Ukraine could build up its military potential are slipping through our fingers.