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Ukraine's steel industry

A news and data feature

Conflict saps Ukraine steel

By Katya Bouckley, Wojtek Laskowski in London

May 19, 2015 - One year set Ukraine 20 years back in time.

For the Ukrainian steel industry, 2014 was the worst in the last 15 years, worldsteel data shows.

Last year threw the country back to the mid-1990s, when Ukraine's crude steel production plummeted from more than 40 million metric tons/year to the 24.4 million mt/year average during 1994-1999 -- due to the vanished USSR market that Ukraine was a big supplier to, and the fact newly born states (former soviet republics) had yet to export.

Ukraine's steel output

Ukraine was submerged in instability throughout 2014.

The armed conflict in its eastern regions of Lugansk and Donetsk resulted in a 17% year-on-year drop in the country's crude steel production, which totaled 27.2 million mt, barely above annual totals during the mid-1990s.

Saleable steel output, at 23.8 million mt in 2014, also fell 18%, says national industry association Metallurgprom.

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Just over half (23 million mt) of Ukraine's 43 million mt/year steel capacity is based in the Donetsk and Lugansk regions and that is why the war there affected the overall output so much.

Last year, Ukraine's major mining and steelmaking group Metinvest alone reported over 10 instances of shelling that directly or indirectly damaged company's coke, sinter and steelmaking plants.

Other Ukrainian steelworks had similar experiences and struggled to work around the damages of war.

For example, mills developed alternative routes -- bypassing the war zone -- to deliver raw materials, urgently laying new rail to replace those uprooted by explosions.

They also quickly restored power supply after transmission lines or substations were downed by artillery fire.

But international traders started to increasingly avoid Ukrainian steel products because there was no guarantee some steel mills would be able to fulfill orders given the tenuous circumstances.

Among the four operational steelmakers of the Donetsk region, only billet mill Elektrostal Kurakhovo managed to lift output by 10% from 2013.

Unlike integrated steelworks, electric arc furnace-based Elektrostal benefited from being much less dependent on railway infrastructure (the destruction of which was among the worst) and the fact it does not need such a variety of raw materials as do the blast furnace-based mills.

Kurakhovo did secure more orders during the August-October outage of competitor -- billet- and section-maker Yenakievo Iron & Steel Works, but its position actually strengthened as early as January 2014, when Russia's Mechel mothballed its 1.1 million mt/year billet and bar mill, Donetsk Electrometallurgical Plant (DEMZ).

Next article: Region-based steelworks bearing the brunt of hardship

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