The Ukrainian iron and steel industry has faced numerous challenges since the full-scale invasion by the Russian Federation, with significant implications for the country’s economy and trade. Before the war, the industry played a crucial role in Ukraine’s GDP, exports, and employment, but the conflict has taken a toll on its capacity and operations.
The latest research by GMK Center for the 95th Session of the OECD Steel Committee highlights the current state of the Ukrainian steel industry. The industry has suffered major losses, with only six out of twelve steelmaking enterprises remaining operational. The total steelmaking capacity has significantly declined from 42 million tons before 2014 to 17.8 million tons in 2024.
One of the key challenges facing the industry is the lack of personnel, with 15% of major metallurgical enterprise employees already mobilized. The ongoing war has also led to internal migration, further exacerbating the personnel shortage and limiting the industry’s growth potential.
Moreover, Ukrainian steelmakers are facing tax problems that hinder their efficiency during wartime. Issues such as tax consolidation and VAT reimbursement are critical for improving business operations and stimulating investments and job creation.
The instability of the maritime corridor is another significant concern for Ukrainian exporters, impacting the transportation costs of steel products and the industry’s competitiveness. The competition with Russian steel products in international markets, coupled with trade restrictions and the uncertain future of the European carbon border adjustment mechanism (CBAM), further complicate the situation for Ukrainian steelmakers.
Despite these challenges, the industry has shown resilience in increasing steel production, albeit still significantly below pre-war levels. International financial assistance aimed at supporting recovery projects and infrastructure renewal could provide a much-needed boost to the industry and the country’s economy.
Overall, the restoration of the Ukrainian steel industry remains a critical priority for the country’s defense capability and economic prospects. Addressing the current challenges and providing support to the industry will be crucial for its recovery and long-term sustainability.
