Ukraine temporarily loses 40% of steel capacity amid Russian invasion: Metinvest

Ukraine has temporarily lost up to 40% of its overall steelmaking capacity following Russia’s fierce shelling of Mariupol in the last three weeks in an attempt to seize the port city, Yuriy Ryzhenkov, the general director of Metinvest, said in an interview with Ukrayina-24 television aired late March 29.

Mariupol, a strategic port on the Sea of Azov, is home to Metinvest’s Azovstal and Ilyich steel works.

Ilyich is Ukraine’s second-largest steelmaker followed by Azovstal.

“Mariupol plants represent more than a third of Ukraine’s overall steel output,” Ryzhenkov said. “In other words, Ukraine has lost between 30%-40% of its steelmaking capacity.”

Metinvest indicated that it would rebuild the steelmaking facilities, but only if Mariupol survived the assault and remained in the hands of Ukraine.

The company is seeking to restart its Zaporizhstal steel works, which has shut operations due to disrupted logistics, as all Black Sea ports remain blocked.

Metinvest also accounts for about 60% of Ukraine’s overall iron ore output, which remains unaffected, and has increased its iron ore exports via rail to Europe almost twofold and plans to supply at least 1 million mt of iron ore to Europe in March.

The group controls three major Ukrainian iron ore producers in the Kryviy Rih region — Pivnichniy HZK, Tsentralniy HZK and Inhuletskiy HZK — and these remain operational, as does its Dneprovsky iron and steel works.

However, Metinvest is finding alternative slab suppliers for its mills in Italy and the UK, after supplies from Mariupol were halted.

“The most difficult situation will be at our Italian and British plants, as they were completely dependent on slabs supplied from Azovstal,” Ryzhenkov said.

The company plans to arrange supplies of slabs at its European plants from China and Brazil, but it will take up to two months to readjust the supplies, according to Ryzhenkov.

“This is a serious shock for European steel industry, which was integrated with the Ukrainian one,” he said.

Metinvest is in talks with the state-owned railway company UkrZaliznytsia to supply raw materials and to ship steel products for exports.

The company increased output of steel by 15% on the year to 9.53 million mt in 2021, while output of iron ore concentrate and pellets rose 3% on the year to 31.34 million mt, it said in a Feb. 1 statement.

Metinvest is not the only steelmaker impacted by the conflict, with ArcelorMittal Kryvyi Rih previously having halted underground operations on Feb. 24 and idled steelmaking on March 3.

No impact to Ferrexpo operations

However, other miners in central and western Ukraine are continuing to work normally.

Iron ore pellet producer Ferrexpo has not had any impact to its operations, which are located near Kremenchuk in central Ukraine, although has experienced some logistical disruptions.

“Initially … our operations continued, but we saw a lot of supply lines and even the services that were being provided either stop momentarily for some days as people assessed what was going on, but we haven’t really seen anything significant in terms of supply of our regular materials that we use,” a Ferrexpo spokesperson told S&P Global Commodity Insights.

Although some of Ferrexpo’s materials have come through the Black Sea, most of its suppliers had found alternative routes or the company was actively sourcing alternatives for certain items, the spokesperson said, such as using rail or road from other unaffected ports.

“We haven’t really seen any disruptions as such – we’ve seen some delays initially, but most of those have been rectified now and we have no real concerns at the moment around the supply of anything that we need for our operations and that’s in terms of gas, power and diesel down to consumables that we’re using in the process,” the spokesperson added.

The company has also had some issues getting products out.

“Approximately half of our materials went out via the Black Sea and we were regularly railing across the border every day and that’s continued, so we’ve been able to get our material across into western Europe and deliver to our customers and some additional material has gone that way as well,” the spokesperson said.

Keeping industry operating and revenues and salaries as normal was also important for the defense of Ukraine, the Ferrexpo spokesperson said.

“We keep the business operating … we keep paying our taxes, we pay those suppliers that are continuing to support Ferrexpo and we support through the humanitarian effort,” he added.

Miner Avellana Gold’s operations had also continued normally as they were situated at Beregovo in far west Ukraine, a spokesperson told S&P Global.

“Our biggest problem is restrictions on imports – only critical is allowed and that halted some of our projects in that we were caught in the middle of modernization and underground mining preparation,” they said.

Meanwhile, Volt Resources’ Zavalievsky Graphite division suspended its graphite mining and processing operations at Zavallya on Feb. 24 as a caution and also relocated management, accounting and marketing personnel from Kyiv to Lviv.

The company did not respond to S&P Global’s request for a comment.

Storey courtesy of Jacqueline Holman, Alexander Bor – Eurometal

Image courtesy of @lifeinkyiv via Unsplash