Inevitable changes: how the war affected the geography and economy of Ukrainian metallurgy

Ukrainian metallurgy is currently experiencing difficult times, as rising production costs and low prices for iron ore create significant challenges for the industry. In 2024, the average ore price was $95 per ton, making its export often only nominally profitable. Dollar inflation in Ukraine, the increase in electricity tariffs (which accounts for up to 50% of production costs) and problems with transport have further complicated the situation. As informs Bloomberg, in 2024, prices for iron ore supplied by Ukraine fell by 29%. This decline was a consequence of the decline in economic activity in China, which is the main buyer of this resource.
The metallurgical industry suffers from logistical and energy problems
According to GMK.center, one of the leading Ukrainian metallurgical companies reported, that in the first half of 2024 its cost of production in dollars increased by 11%. To this should be added problems with logistics. Due to high transportation costs, limited number of ships and insurance risks in the Black Sea, sea shipping remains an expensive and risky option.
Railway logistics also add to the difficulties. As you know, since December 9, “Ukrzaliznytsia” raised tariffs for the transportation of goods by 37%, which will increase the cost of transporting iron ore by approximately 2.7%. This puts at risk the competitiveness of Ukrainian exporters, who are already working in conditions of low margins.
The main hope remains for the end of the war, which could improve logistical conditions and reduce transportation costs. However, even in the case of stabilization, Ukrainian manufacturers will have to adapt to the harsh conditions of the world market.
To understand the scale of the problems, it is worth remembering that in 2023, Ukraine reduced iron ore exports by 26% compared to the previous year, and compared to the pre-war year 2021, exports fell by 60%. Revenue from the export of ore decreased by almost 40%, amounting to $1.77 billion.
The main players in iron ore production remain large enterprises, such as Inguletsky, Kryvorizky, Poltava and Northern mining and beneficiation plants, as well as “ArcelorMittal Kryvyi Rih” and “Sukha Balka”. But each faces a challenge: finding ways to stay competitive despite the challenges.
“Sea Corridor” saves exports
Steel sector remains one of the key branches of the Ukrainian economy, providing a significant contribution to the formation of the country’s GDP and export potential. In 2024, steel production exceeded expectations, reaching 7.5 million tons, which is 21% more than the previous year. However, these indicators are still significantly lower than the pre-war level of 2021, when steel output was 21.4 million tons, i.e. a decrease of 65%.
The main driver of the improvement was the intensification of logistics thanks to the launch of the “maritime corridor” at the end of 2023. This made it possible to reduce the load on western transport routes and simplify exports. The “Sea Corridor” contributed to the restoration of iron ore supplies to China. In 2024, 13 million tons of ore were exported to this country, which accounted for 43% of all Ukrainian iron ore exports.
Infographic: IA “FACT”
The operation of the second blast furnace at “ArcelorMittal Kryvyi Rih” was resumed in the spring of 2024. Thanks to this, the export of semi-finished products increased by 60%, and rolled products – by 40% in 11 months. The second blast furnace worked from April to August – this became known from the interview of the general director of the Kryvyi Rih mining and metallurgical plant PJSC “ArcelorMittal Kryvyi Rih” Mauro Longobardo “Interfax-Ukraine”. It was a period when her work was facilitated by the appropriate economic situation. At the same time, currently “AMKR” uses only one blast furnace, because in winter the situation worsened mainly due to electricity.
Infographic: IA “FACT”
However, the industry’s outlook for 2025 is worrisome. A decrease in steel production by 9% and exports by 16% is forecast. This development of events is connected with a number of factors. First of all, we are talking about the high cost of production due to the increase in energy prices, dollar inflation and the increase in tariffs for railway transportation. In addition, the global steel market is experiencing oversaturation and rising costs due to climate change. Logistical constraints also play an important role: a shortage of ships, high insurance costs and increased risks of transportation in the Black Sea make exports much more difficult.
In 2023, the steel sector provided 5.7% of Ukraine’s GDP and formed 15% of all exports. However, the third year of the war dealt a significant blow to production capacity, disrupted logistics chains and intensified competition in world markets.
New adaptation strategies are needed to stabilize and grow the industry. Ukrainian manufacturers should strengthen their position on the European market, reduce energy dependence and look for alternative export routes. Further development will depend not only on internal reforms, but also on the global economy, which is currently under pressure from climate change, rising energy prices, and unstable demand for metal products.
ArcelorMittal: working at the limit of possibilities
ArcelorMittal Kryvyi Rih (AMKR), the largest metallurgical plant in Ukraine, today found himself in the vortex of extremely complex challenges caused by war and economic crisis. Located near the front-line zone, the plant, despite everything, remains a strategic enterprise that continues to work, adapting to new realities.
During the war, AMKR production was reduced to 30-50% of pre-war capacities. The biggest problems arise due to interruptions in the supply of electricity, its high cost and damage to the energy infrastructure. In the winter period, only one blast furnace works, which significantly limits production possibilities. In 2024, the plant produced 1.6 million tons of metal products, of which 1.15 million tons were finished products. For comparison, before the war, the enterprise produced up to 6 million tons of products.
In the third year of the war, the company faced multi-million losses: for 2024, the expected financial result will be approximately $100 million in losses. High tariffs for electricity, rising costs of logistics and low prices on world markets do not allow the company to reach the level of profitability. At the same time, the ArcelorMittal group continues to support the plant financially, ensuring its survival.
There are also significant problems with personnel. Due to the war and mobilization, AMKR lost about 9,000 workers. Replacing this deficit has become a serious challenge: the company lacks qualified electricians, machinists and production specialists. To cope with this crisis, the plant is attracting young people through internship programs and cooperation with universities, as well as actively employing women in positions that were previously considered “traditionally male”. The war also changed the geography of product sales. The blocked ports forced the plant to focus on the neighboring markets of Eastern Europe, the USA and the domestic market of Ukraine. Despite the difficult conditions, AMKR continues to supply pig iron to the USA, where Ukrainian products have a high reputation.
Despite all the challenges, AMKR has a clear plan for 2025. The company plans to increase production to 2.5 million tons of steel by resuming the operation of two blast furnaces in the second half of the year. The plant will also continue to invest in strategic projects, such as the “Tretya Karta” tailings facility, which will become a key facility for ensuring long-term development.
CEO Mauro Longobardo emphasizes that the main goal of the company is to remain sustainable and competitive, even in the most difficult conditions. He is sure that after the end of the war, AMKR will not only restore its capacities, but will also become a key player in the reconstruction of Ukraine, providing the domestic market with high-quality metal products.
ArcelorMittal Kryvyi Rih needs more transparent working conditions and stable tariffs for energy resources. Instability in regulation and exorbitant costs threaten not only the financial results of the company, but also the development of the industry as a whole. The company calls on the government to create conditions that will allow Ukrainian industry to recover and develop after the war.
AMKR continues to fight for its future, investing in production, supporting workers and keeping faith in the victory of Ukraine.