Ukraine's steel industry is in the critical state, seeing production stoppages caused by Russian attacks, cost optimisation, dependence on imports and new EU trade restrictions, Oleksandr Vodoviz, Head of the CEO's Office at Metinvest Group, told the Polish business portal Strefa Biznesu.
According to him, the situation is very difficult due to attacks on Zaporizhstal and Kamet Steel that led to the shutdown of these enterprises, the situation is indeed very difficult.
"The Russians know that the steel industry is extremely important to Ukraine. They are targeting industrial facilities, while drones and missiles fly over the area every day. The plant in Zaporizhia is currently not operating. The situation is so difficult that the question now is whether Ukraine's steel industry will survive at all. We cannot simply stop operations and then restart the plant once conditions improve. The furnaces have been destroyed, and the steel structures have also sustained serious damage. People have been killed at the plant. From the moment the air-raid alert was issued, there were only two minutes to reach a shelter. Will we try to restart the furnaces? At present, we do not see any way to do so. Perhaps in the future," Vodoviz said.
He said that Metinvest employs around 50,000 people, including those currently serving in the Ukrainian defence forces. Until the last possible moment, the group tried to avoid redundancies. However, today, to survive, preserve production and protect thousands of jobs, the group has to reduce costs, optimise business processes and reduce headcount, primarily in areas where workloads have fallen significantly. The group will support the employees affected: they will receive compensation and, where possible, the group will offer them vacancies at other production facilities within the group.
Vodoviz said that Zaporizhstal supplied products to many countries around the world, and the EU was its main sales market. We have many customers in the EU who will now no longer be able to receive our products. Last year, the group acquired a pipe plant in Romania. Under the original plan, Zaporizhstal was to supply sheet steel to this facility. However, the Romanian plant is now operating at a lower level of output. New EU quotas have already restricted supplies of Ukrainian raw materials, while Russian missile strikes on the group's facilities in Ukraine are creating additional risks for these supplies. "If we are unable to provide the plant with sufficient raw material, it may ultimately have to cease operations," he added.
"I do not know whether EU steelmakers are prepared to replace our supplies. I do not think so, because they are less competitive on price," he said, adding that EU producers have their own well-developed market, where prices are higher, and they would be less competitive on price in Ukraine. Suppliers from Türkiye or South Korea can offer more competitive prices. So, if domestic production disappears, Ukraine will become increasingly dependent on imports from those markets.
Vodoviz also talked about demand for Ukrainian steel in the EU. With the introduction of the quotas, Ukraine is permitted to supply 600,000 tonnes of steel. "On the one hand, Brussels says that it sees Ukraine as part of the EU; on the other hand, the quotas are distributed unfairly," he said.
"The quotas were introduced in July. When they were allocated, account was taken of the volumes of steel that different countries had traditionally supplied to the EU, the level of duties that had applied over the previous two to three years, as well as Ukraine's potential supply volumes compared with those of other countries: Türkiye, South Korea and India. And what happened? Türkiye exhausted its entire quota within the very first week. We would like the EU to respond to this. Ukraine is at war. We are not thinking about how to compete; we are thinking about how to survive," Vodoviz said.
He added that this December, the EU will decide whether these quotas should be reduced or increased. The decision will be based on the volume of supplies from Ukraine during the six months preceding December. The decision taken in December will remain in force for the next five to ten years. "We are concerned that we may not have enough time to do anything about it," Vodoviz said.
"We also believe that the Carbon Border Adjustment Mechanism is unfair to Ukraine. Brussels has spent around EUR1 billion on reducing emissions at its own steelmaking facilities. Ukrainian plants have received no such support, while missiles and drones fly overhead every day. Perhaps the EU could consider temporarily exempting Ukraine from this mechanism? While we are prepared to reduce emissions, we do not currently have the financial resources to do so. We are raising this issue in Brussels and in Ukraine, but we do not see any indication that anyone is listening to us," the expert said.
The head of the CEO's Office at Metinvest Group beleives that preserving Ukraine's steel industry is also in the interests of the EU. In that case, the EU may ultimately need to spend less on keeping Ukraine functioning. Before the war, the steel industry was the largest taxpayer to Ukraine's state budget, while Metinvest was Ukraine's largest steel exporter. If the steel industry declines, tax revenues will fall. Overall, the industry contributed around UAH 200 billion to the state budget.
Asked how the Ukrainian government supports the steel industry, Vodoviz said that all government financing programmes are focused on small and medium-sized businesses rather than large enterprises. There are no programmes for companies such as Metinvest. The steel industry has effectively been left to deal with its problems on its own.
"While I criticise this, at the same time, I understand the problems facing the state budget. It has an enormous deficit. There is not even enough money to purchase Patriot missiles, let alone provide support for the mining and metals sector. But if the state supported this industry, more money would flow into the budget. It is a vicious circle," the top manager said.
The issue of Huta Częstochowa, which Metinvest planned to acquire, was also discussed. "Back in the spring, we wanted to acquire the plant. We said that Poland's Ministry of National Defence did not necessarily need to become its owner. We were prepared to invest EUR 200 million… We explained that this plant is not intended for the defence industry. The government made its decision, and now I read in the Polish press that it is having problems with the plant. Defence requirements are not a sufficient reason to acquire a steel plant. At least, they should not be the main reason," the expert said.
Metinvest is a vertically integrated group of mining and metallurgical enterprises. The group's plants are located mainly in Donetsk, Luhansk, Zaporizhia and Dnipropetrovsk regions. The holding's main shareholders are the SCM group (71.24%) and Smart-Holding (23.76%), which jointly manage it. Metinvest Holding LLC is the group's management company.
