Mining and metallurgical complex critically dependent on sea freight; alternative routes can only cover 25-30% of these volumes - Ukrmetalurgprom CEO
Mining and metallurgical complex (MMC) enterprises are extremely dependent on sea freight; alternative routes can only cover 25-30% of these volumes, stated Oleksandr Kalenkov, president of Ukrmetalurgprom, at a press conference entitled "Ukrainian exports without the sea: why there is no alternative to ports" hosted by Interfax-Ukraine.
"We traditionally export 80% of our metal products, more than 50-60% of our iron ore. And 90% of these exports are shipped by the most efficient route – by sea. Moreover, we export our products, such as iron ore, to distant markets – China and third countries – which requires covering very long distances," stated the head of Ukrmetalurgprom.
He clarified that the main factor in competition in global markets is cost, one component of which is logistics. Therefore, Ukraine suffered greatly in 2022, when logistics costs increased four- to fivefold, making it physically impossible to export goods from Ukraine. The most positive factor impacting the industry was the opening of a sea corridor from Ukraine in 2023.
"Now, since mid-July, the situation is as critical as it was in 2022. The sea route is completely blocked, and we are looking for alternative routes, but it's clear that nothing can replace the sea. I would like to draw special attention to alternative export routes, because some officials are estimating that somewhere around 75% of the volume we exported via the Black Sea could be redirected to the Danube or the western border crossings. Unfortunately, the ratio is the opposite: I believe that only 25-30%, at best, could be shipped via the Danube, through the western border crossings. This is assuming the water level in the Danube is sufficient, and that we cooperate with our partners—the Romanians, the Poles, and others—to ensure that the border crossings operate around the clock, and so on," Kalenkov believes. He said this issue should be brought to the attention of partners, especially EU countries, so they can assist in this situation, particularly in terms of security and military action. After all, there is no full-fledged alternative to seaports. Alternative solutions: this needs to be addressed, and everything that can be shipped through Danube ports and western border crossings should be done so. However, this will lead to a significant increase in shipping costs – depending on the type of goods, the increase could range from $60 to $90 and even $100 per tonne.
And if a tonne of iron ore raw materials (IORMs) currently costs $100 per tonne on the market, such a premium makes the product uncompetitive. This is radically different from the situation in 2022, when the price environment for IORMs was much better.
The head of Ukrmetalurgprom recalled that, effective August 1, 2026, rail freight rates have increased by 30%, plus shipping costs within Europe. Moreover, the capacity of European ports is limited.
"Even if we transport our products via alternative routes, we won't be able to export everything, and businesses will suffer huge losses. As I've already said, if our production costs increase by $100 per tonne, we hope the state will partially compensate for this cost," Kalenkov said.
He also emphasized that if problems in the mining and metallurgical sector worsen, "if our industries that create a multiplier effect in the economy begin to collapse, then the budget hole, the loss of foreign exchange earnings, and unemployment will lead to far greater economic losses for Ukraine than finding funds to offset these additional logistics costs."
The expert sees assistance from partners who could provide targeted funding to Ukrzaliznytsia, at least to cover the difference in passenger traffic, as one option for funding such compensation and covering passenger losses.
At the same time, Ukrzaliznytsia should cancel the 30% increase in freight tariffs or introduce certain discounts for companies using export corridors.
"Let me remind you that to produce one tonne of pig iron or steel, we need to transport three tonnes of raw materials within the country, and this also increases the cost of the process—each such shipment increases the cost. I believe that if our partners provide funding, we can find a scheme that optimally compensates the industries that suffered losses due to the current sea closure, and return to the practice we had in 2022—the so-called 'solidarity corridors,' where the EU compensates European carriers for the costs of transporting our goods in transit from Ukraine's western border crossings to European ports. This would truly be a victory for us; it would be hope that we will be able to export at least some of our production," the expert believes.
He called on the government to more actively cooperate with other countries on these issues, including through the implementation of the SBAM and the introduction of quotas on product deliveries to the EU.
"Our industry creates 7,500-8,000 jobs in other industries because we are closely integrated into production chains. We continue to invest EUR 700-800 million annually in supporting production, which creates a multiplier effect for the entire economy. Our enterprises are located in regions adjacent to the combat line – Zaporizhia region, Dnipropetrovsk region, and others. Therefore, it is crucial to support the economic situation in these regions," Kalenkov emphasized.
The head of Ukrmetalurgprom believes it is necessary to lift the CBAM for Ukraine during the war, as well as return to a liberal trade regime with Ukraine and remove restrictions such as tariff quotas. This would play a positive role, Kalenkov concluded.
As reported by Oleh Khomenko, CEO of the Ukrainian Club Agribusiness (UCAB), additional costs for shipping Ukrainian agricultural products to alternative unloading points if exports are redirected from the sea route amount to EUR 50-90 per tonne.
"Reorganizing logistics chains cannot fully replace the Black Sea – neither in terms of route complexity, nor in terms of economics, throughput capacity, nor in terms of cost. Because currently, additional costs for shipping to alternative unloading points, compared to the Black or Baltic Seas, range from EUR 50 to EUR 90 per tonne," Khomenko said.
According to him, rising logistics costs impact the competitiveness of agricultural production and the financial health of agricultural enterprises, as well as the flow of foreign exchange earnings.
He noted that the current situation is particularly critical given the agricultural production cycle, as Ukraine is entering the fall sowing season, when agricultural producers need to accumulate funds. At the same time, he said, problems with grain storage and shipment are accumulating.
He stated that the most critical period for the agricultural sector will be December-January. If Ukrainian seaports are not unblocked by then, the spring sowing campaign, which begins in March-April, could be at risk of being disrupted due to a lack of funds among agricultural producers.
According to Khomenko, the 30% increase in Ukrzaliznytsia tariffs further increases logistics costs for agricultural enterprises exporting their products, so it should be temporarily suspended. "This decision must be reconsidered. We must temporarily agree that this tariff increase should be reversed at the government or Ukrzaliznytsia level to alleviate the liquidity and logistics costs for agricultural and other companies exporting their products," he said.