Fitch Solution rating agency said: “We maintain gloomy prospects for the Ukrainian steel industry in the coming years, due to the ongoing conflict in the Donbass, which disrupts the vital supply chain for steel producers.

In general, lower steel prices and rising protectionism in the steel sector will create further obstacles to the recovery of domestic industry. Low base effects and restructuring of operations among key manufacturers will lead to a slight recovery in production this year, but production will remain well below pre-conflict levels throughout our 10-year forecast period. We believe that the Ukrainian steel industry is likely to remain under pressure in the coming years due to a combination of domestic and global problems. ”

In the domestic market, the conflict in the Donbass continues to be the main deterrent for Ukrainian steel producers. The conflict started in 2014 and affected a significant part of the Ukrainian metallurgical industry, including a number of steel mills and the vast majority of coal reserves in the country, which are located in the Donbass region, and the outbreak of the conflict seriously affected domestic steel production. For example, up to 55 coal mines out of 150 operating throughout the country were lost after the outbreak of conflict, while domestic steel production fell from more than 2.82 million tons of steel per month in May 2014 to 1.76 million tons per month by August of the same year.

The report said: “Although production was slowly recovering in 2015 and 2016, any progress in this direction was hindered in 2017 after the imposition of the Donbass blockade. The official blockade of all goods passing between Ukraine and the territories occupied by the rebels in Donbass was introduced by the Ukrainian government in March 2017 after the rebels came under the control of Ukrainian business in the Donbass. The blockade, which remains to this day, has seriously violated the production supply chains for steel producers due to the fact that 66% of metallurgical coal in Ukraine, necessary for steel production, is located in the separatists controlled by Donetsk and Lugansk regions, and about 80% is domestic production "Iron ore, another key ingredient in steel, is located in government-controlled areas."

Muffled forecasts regarding the average increase in steel production in Ukraine from 2019 to 2028 compared to the same period last year are based on the assumption that the status quo will remain in the foreseeable future and only if the conflict was significantly de-escalated or the blockade was completed, Fitch would reconsider the prospects metallurgy of Ukraine.

 

Based on materials: https://lityo.com.ua