Challenges persist for the Ukrainian steel industry
Ukraine’s steel sector, once a cornerstone of the national economy, continues to face severe challenges. In 2021, Ukraine ranked as the world’s 14th-largest steel producer, contributing around 6% to GDP. However, the ongoing war has severely disrupted operations, with major production facilities destroyed or occupied, electricity shortages caused by attacks on energy infrastructure, and logistical constraints due to port blockades.
One of the latest developments was the closure of the Pokrovsk coking coal mine which was the last remaining coking coal site in unoccupied territories of Ukraine. This could lead to a 40% reduction in steel production compared to 2024. Beyond the war-related factors, the US tariffs on steel products display an additional shock. As this sector is crucial to Ukraine’s economic recovery and reconstruction effort, Ukraine would need to find ways to close the production gap.
Continued challenges on the supply side
Russia’s full-scale invasion in February 2022 delivered an immediate shock to Ukraine’s steel sector, with 38% of production capacity destroyed according to a study by Low Carbon Ukraine (2024). By late 2022, output had fallen sharply. Despite these setbacks, the sector remains operational. In 2024, annual crude steel production reached 7.6 million (m) tonnes. While this marks a 65% decline compared to pre-war levels, it also reflects a 22% increase from 2023. Although this might indicate some recovery in the sector, however, the sector’s share within GDP fell to 2% in 2023.
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Before the war, Ukrainian steelmakers operated at 75% capacity utilization, but by 2024, this had dropped to around 42%. The main factors were the destructions and occupations of the Azovstal plant as well as the Ilyich plant, which together accounted for 38% of Ukraine’s total installed production capacity. Other supply-side challenges include security risks, logistical disruptions, labour shortages due to mobilisation and migration, and intermittent power outages from attacks on energy infrastructure.
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Disruptions to coking coal supply from Pokrovsk
Ukraine’s steel industry has historically depended on domestic coal for coke, primarily supplied by the Pokrovsk coal mining complex in Donetsk Oblast. Pokrovsk was the country’s only major producer of coking coal, providing around 90% of Ukraine’s metallurgical coal supply. Its closure is forcing steel producers to rely on imports, which are costlier, driving up production costs. Compared to total annual steel produced in 2024, we estimate that the loss of Pokrovsk’s coking coal could reduce output by around 40%. If the Pokrovsk mine is not recovered, relying on imported coking coal will not be sustainable for the Ukrainian steelmakers.
Domestic demand
By the end of 2024, Ukraine’s domestic steel consumption stood at 3.3 m tonnes, a 35% decline compared to 2021, with imports accounting for 36% (1.2 m tonnes). Compared to 2023, domestic demand showed no signs of recovery, decreasing by 5%. The increase in steel production from 2023 to 2024 did not translate into higher domestic consumption. One of the reasons was the prioritisation of export markets, with share of exports in total production rising to 67% in 2024 from 38% in 2023. Additionally, delays in construction projects caused by lack of financing, labour shortages, and war-related risks contributed to slowdown in domestic consumption.
Recovery is observed in exports of iron and steel
In 2024, Ukraine’s total iron and steel product exports reached USD 3.8 bn. While this is a 73% decline from 2021, exports increased by 24% yoy from 2023. Meanwhile, sector’s share within total exports decreased from 20% in 2021 to 9% in 2024. The share of EU within Ukraine’s total iron and steel exports rose by 25 percentage points compared to 2021, reaching 63% (USD 2.3 bn). This was supported by higher production from a reduced base, and the reopening of the Ukrainian Sea Corridor (USC). Exports via the USC helped access key pre-war markets for Ukraine, which compensated for the weak EU demand. The increased exports contributed to the price declines in global markets (~37% drop in flat steel prices from 2021 to 2024), and while lower prices hurt margins, Ukraine compensated by increasing export volumes.
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The establishment of the USC in August 2023 partially restored Black Sea access for metal exports, allowing Ukraine to prioritise sea shipments over rail (sea and river exports grew eightfold yoy in the first half of 2024). This shift played a key role in the overall increase in exports in 2024 compared to 2023.
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US tariffs on Ukrainian steel pose new challenges
In February 2025, the US administration reinstated a 25% tariff on steel imports from all countries, adding further risks to Ukraine’s steel sector. In 2024, exports of iron and steel products to the US totalled USD 0.5 bn, accounting for 13% of Ukraine’s total iron and steel exports. Pig iron, which will be exempt from the tariff, made up 73% of these exports. However, the main affected product group is tubes and pipes, representing 23% of exports to the US (USD 113 m). Additionally, the tariffs will impact Ukrainian producers through imports of products processed in the EU using Ukrainian steel. According to a statement by the Association of Ukrainian metal producers Ukrmetallurgprom, for example, this could result in an estimated loss of USD 58 m for Metinvest Group on exports to the US from their Bulgarian assets, which rely on Ukrainian steel.
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Outlook
The Ukrainian steel industry continues to face major structural and operational challenges. If the Pokrovsk coking coal mine remains closed, Ukrainian producers will struggle with production, and unsustainably relying on imports will negatively affect profitability. Moreover, production bottlenecks are expected to persist long after the war. The reintroduction of the 25% US tariff on steel imports will add further pressure on the sector. Furthermore, CBAM will bring additional pressure on profitability, as the Ukrainian steel plants are highly emissions intensive. Ukraine’s green metallurgy sectoral priority outlined in the ‘Ukraine Plan’ as part of EU’s Ukraine Facility aims to modernize the sector to align with EU standards. But the transition will be challenging and access to large amount of financing will be needed. Once the focus can be set on full-scale reconstruction, domestic steel demand is expected to surge to rebuild buildings, bridges, railways, and industries, as well as from the domestic defence industry. Though new export opportunities may arise from increased military production in the EU, Ukraine could shift from being a net exporter to a net importer of steel due to the persisting production challenges and the expected rise in domestic consumption.
