The metallurgical industry will resume after the deblockade of ports, – commercial director of Metinvest Group


The metallurgical industry will resume after the deblockade of ports, - commercial director of Metinvest Group

The opening of seaports not only for grain, but also for metallurgical exports can provide Ukraine with up to $600 million in foreign exchange earnings per month. In addition, this move will save jobs.

Dmitry Nikolaenko, commercial director of Metinvest, spoke about this in a column for Forbes. What is the state of the Ukrainian mining and metallurgical company and what is now known about the prospects for the resumption of export capacities, we will tell further.

The Group's enterprises operate on the verge of profitability

At the end of 2022, 100,000 bracelets made from the last batch of steel from the Mariupol metallurgical plant Azovstal were sent from Ukraine to buyers from 44 countries of the world. However, by the beginning of the full-scale Russian invasion, the geography of Azovstal's exports was wider: products were supplied to 90 countries.

Today, both Mariupol enterprises of the Metinvest Group – Azovstal and MMKI, which accounted for about 40% of Ukrainian steel production, have been destroyed and removed from the Ukrainian economy due to the occupation of the city by the aggressor.

The losses are not limited to the loss of control over the leading enterprises, since even in the territory controlled by Ukraine, factories operate at less than a third of their capacity. In particular, in December 2022, the Kametstal and Zaporizhstal metallurgical plants were loaded at 25% and 33% of the pre-war level, respectively.

In fact, industry enterprises are now working on the verge of profitability in order to maintain capacities and jobs.

One of the main reasons for this decline in production was problems with the sale of products due to the blocking of sea exports , because before the start of a full-scale war, about 80% of Ukrainian metal was supplied by manufacturers abroad. About 70% of metallurgical products were exported from Ukraine through seaports, but since the beginning of a full-scale war, they have remained blocked for most exporters, except for representatives of the agricultural sector.

Of course, metallurgists are looking for alternative ways to supply their products abroad and use the possibilities of the railway and river ports. However, due to a significant increase in the railway tariff (up to 140% for ore, coal and coke and up to 70% for ferrous metals) and additional costs for the delivery of products to EU ports, the cost of logistics increased by 4-6 times.

As a result, in 2022, Ukraine's income from the export of ferrous metals decreased by 67.5% compared to 2021 , to $4.533 billion. But under the current conditions, even this result is a great achievement. It should be noted that the mining and metallurgical complex (MMC) is one of the leading sectors of the economy.

On the eve of the war in 2021, MMC accounted for 33% of Ukraine's total exports worth $22 billion. At the same time, the industry's contribution to GDP reached 10%. Accordingly, the indicated reduction in metallurgical production and exports leads to significant losses – the country's GDP in 2022 collapsed by almost a third.

But there is good news: the steel industry has the potential for a quick recovery if, in addition to the existing grain export corridor, it is possible to open ports for the export of MMC goods . This will strengthen the economic strength of the state, as it will generate about $600 million in export earnings per month and will save hundreds of thousands of jobs.

Today, Metinvest Group, on behalf of the entire industry, calls on Ukrainian authorities, diplomats and international partners to make every effort to open the sea for Ukrainian steel, which has already become a symbol of Ukrainian struggle and invincibility for the whole world.

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