Key facts
- Ukraine's steel industry is nearing collapse due to increased Russian missile strikes on factories.
- Major companies like ArcelorMittal Kryvyi Rih, Metinvest, and Interpipe have suspended production.
- The sector, which contributed 7% of Ukraine's GDP last year, has suffered an estimated $100 million in damages from recent attacks.
- The closure of Black Sea ports and EU trade rules are further hindering the industry.
- Industry representatives are calling for a steel fund, financing for oligarch-owned companies, and relief from EU carbon policies.
- Reopening the Black Sea trade route is seen as a critical boost for exports and logistics costs.
Ukraine's steel industry is facing an existential crisis, teetering on the brink of collapse due to a relentless campaign of Russian missile strikes targeting key industrial centers. ArcelorMittal Kryvyi Rih, Ukraine's largest steel producer, announced on September 25 that it is unable to restart production amid the intensified attacks. The metallurgy sector, a significant contributor to Ukraine's gross domestic product (GDP) and employer of tens of thousands, has been severely impacted, suffering at least nine ballistic missile attacks since August.
These strikes have likely cost steelmakers close to $100 million, according to Oleksandr Kalenkov, president of Ukrmetallurgprom, a Ukrainian steel association. This year marks the sector's worst performance since 2022, when the occupation and destruction of the Azovstal and Illich plants in Mariupol eliminated 40% of Ukraine's steel production capacity. Russia's precise strikes have targeted critical equipment like blast furnaces, halting the production of pig iron, a vital component for steel manufacturing. Consequently, Ukraine's top three steel companies—Metinvest, Interpipe, and ArcelorMittal Kryvyi Rih—have all suspended operations.
Beyond direct attacks, the industry faces a confluence of challenges. Russia's campaign has disrupted Ukraine's Black Sea ports, impeding exports and imports. Simultaneously, new EU trade rules and anti-carbon policies have restricted market access and increased the cost of selling into Europe. Many major metallurgy companies are ineligible for funding from international financial institutions due to ownership by oligarchs, while overland trade routes are prohibitively expensive for companies already experiencing significant monthly losses.
Industry leaders are urgently seeking greater support from international partners and the Ukrainian state. Kalenkov warned that without intervention, companies might be forced to halt production for the duration of the war, jeopardizing employee retention. Denys Sakva, a senior analyst at Dragon Capital, noted that a collapse of the steel industry would lead to higher construction costs, increased inflation, and more expensive reconstruction efforts, as building firms would need to import pricier steel from Europe.
Karin Karlsbro, a member of the European Parliament, criticized the EU's current trade policies, stating they undermine Ukraine's industrial infrastructure. She is advocating for an urgent review of trade policies and the removal of Ukraine from the EU's tariff regime. "If we seriously want to support Ukraine’s ability to defend itself, we must do what we can to support the industrial infrastructure," Karlsbro stated, emphasizing that a collapsing Ukrainian economy would make self-defense more difficult and increase dependence on EU aid.
Proposals for support include establishing a steel fund, similar to the Ukraine Energy Support Fund, to pool financing for critical equipment procurement and emergency repairs. Oleksandr Vodoviz, head of Metinvest's CEO office, suggested such a fund could enhance operational resilience for companies near the front lines. Kalenkov also called for negotiations with institutions like the European Bank for Reconstruction and Development (EBRD) to enable financing for oligarch-owned companies like Metinvest, which is owned by Ukraine's wealthiest individual, Rinat Akhmetov.
High logistics costs due to the Black Sea port closures are another major burden, with companies paying 50%-60% more for rail or overland transport. Kalenkov proposed that EU partners could help cover these costs, allowing companies to import necessary materials and potentially resume exports of iron ore if steel production remains impossible. Unrestricted access to the EU market and relief from the Carbon Border Adjustment Mechanism (CBAM) are also crucial, as Ukrainian producers struggle to finance decarbonization while facing repeated rebuilding efforts.
The most significant boost would come from reopening the Black Sea, which would reduce logistics expenses and enable the export of iron ore to generate much-needed revenue. While 51 countries have backed Ukraine's call for a renewed Black Sea trade route, Russia has shown no indication of ceasing attacks on ports and civilian vessels. Even with substantial support, Kalenkov estimates it will take many months and tens of millions of dollars to relaunch steel production, contingent on avoiding further strikes.