EU decision could halve Ukrainian steelmaker Zaporizhstal's capacity and force shift to pig iron

Ukrainian steelmaker Zaporizhstal may shift from steel production to pig iron production, leaving around 50% of its capacity idle due to new European Union import restrictions.

Source: Oleksandr Myronenko, Chief Operating Officer of the Metinvest Group (Zaporizhstal's parent company), in a comment to Reuters

Details: Myronenko told Reuters about the possibility before the latest Russian strike on the plant.

From 1 July, the EU almost halved its annual quotas for duty-free steel imports and imposed a 50% tariff on imports exceeding the quotas. Ukraine's quota will be around 1 million tonnes – 60% below its 2025 trade volumes, according to calculations by Kyiv-based consultancy GMK Center.

The restrictions could prompt Zaporizhstal to increase its production of pig iron, which is not subject to the quotas. Reducing the output of higher-value-added steel products would mean shutting down some production lines and the company would have to reassign employees to other work.

The Federation of Employers of Ukraine estimates that the new restrictions could result in a US$1.2 billion loss in foreign-currency export revenues and reduce GDP by 0.6%.

The situation is further complicated by Russian attacks on Black Sea shipping routes and industrial facilities. As Metinvest has redirected imports of coking coal through European ports, Zaporizhstal's costs have risen by US$30-40 per tonne. Since August, producers have also been paying 30% more for rail freight.

From 1 January, exports to the EU are also subject to additional carbon charges. Before the full-scale war, Metinvest planned to spend US$8 billion over 15 years to transition to "green steel" production, but Myronenko said this is unrealistic under wartime conditions.

Background:

• In January-April 2024, Ukraine increased its revenue from ferrous metal exports by 16.6% to US$959 million. Steel production rose by 33% over the same period, while rolled steel output increased by 30.5%.
• The Zaporizhstal steelworks completely halted operations following a Russian ballistic missile strike. Seven employees were killed and another 21 people were injured.

Support Ukrainska Pravda on Patreon to help us keep reporting!