Summary
The Ukrainian iron and steel industry continues to navigate the challenges posed by the ongoing conflict with Russia, demonstrating resilience in the face of significant adversities. In 2023, capital investments within the steel sector reached UAH 16.6 billion, reflecting a 41% year-over-year increase in total capital investment across Ukraine, which amounted to UAH 395 billion. While this growth is promising, it is essential to acknowledge that it remains a byproduct of inflation and currency devaluation, preventing a return to pre-war investment levels in the foreseeable future. The war’s impact on the steel industry has been severe, with the number of operational steel mills reducing from twelve in 2013 to just six currently, and production capacity plummeting from 42 million tonnes to 17.8 million tonnes. Despite these challenges, the steel industry has emerged as a notable investor in the national economy, accounting for nearly 10% of total industrial investments by the end of 2023. The overall investment climate in 2023 saw a stabilization of capital expenditures following a significant downturn in 2022. Although total capital expenditures in the steel industry decreased by 7.2% year-over-year to UAH 16.6 billion, investments in steel production specifically saw a modest increase of 3.3% to UAH 8.2 billion, contrasting with a 15.6% decline in iron ore production investments, which totaled UAH 8.4 billion. Major industry players have displayed varied investment strategies amid these adverse conditions. The Metinvest Group, despite enduring substantial losses from damaged facilities in Mariupol and Avdiivka, invested $284 million in production facilities in 2023, with a focus on both steel production and mining operations. The company has earmarked plans for $320 million in capital investments and $350 million in operational investments for 2024, alongside a committed $9 billion for future green transformations post-conflict. Similarly, Ferrexpo, an iron ore enterprise, devoted $101 million to its operations in 2023, prioritizing projects initiated prior to the full-scale invasion. Interpipe, another industrial entity, increased investments in production facilities by an impressive 48%, reaching $31 billion, while promoting a significant initiative to enhance green steel production. Additionally, ArcelorMittal Kryvyi Rih has invested a total of UAH 9 billion ($217.4 million) over the two and a half years of conflict, with planned increases in capital investments for 2024. The company’s primary focus remains on the construction of a new tailing dump. The cautious investment strategy exhibited by these companies primarily emphasizes financing essential projects for production continuity, as evidenced by Metinvest allocating 80% of its capital expenditures towards maintaining operational capacity. This approach underscores the reluctance to commit to new projects until hostilities diminish, thereby ensuring the sustainability of existing production frameworks. Looking ahead, the ongoing conflict raises significant concerns regarding the future of Ukraine’s steel sector, particularly due to the pervasive high risks associated with business operations in the region. Increasing global protectionism and newly implemented mechanisms such as the Carbon Border Adjustment Mechanism (CBAM) further complicate investment efforts. Therefore, securing international financial assistance and accessing European funds to transition to decarbonized production technologies will be vital for the long-term recovery and advancement of the Ukrainian steel industry. The investments made today will undoubtedly shape the industry’s capabilities for years to come.
Original Source: gmk.center
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