Speaking at the SteelOrbis Spring 2022 Conference & 86th IREPAS Meeting held in Istanbul on May 29-31 Roman Perepelytsia, head of strategy and business development, Metinvest Holding, explained the two possible scenarios after the war in Ukraine. Both scenarios predict a deep economic recession, though in the event of Ukraine’s victory economic recovery to the pre-war level is expected within approximately five years, while in the case of a prolonged war a deep economic recession is expected to last from one to two years, followed by economic stagnation in the long term, Mr. Perepelytsia said. In 2022, Ukraine’s real GDP is expected to fall by 30-40 percent, according to various forecasts. In the best-case scenario, the Ukrainian economy will reach the level of 2021 only in 2026. In the case of Ukraine’s victory it is predicted that Ukraine’s crude steel output will reach 7.6 million mt in 2022 and 8.3 million mt in 2023, while rolled steel output will amount to 6.9 million mt in 2022 and 7.6 million mt in 2023, and rolled steel exports are predicted to reach 4.7 million mt in 2022 and 5.1 million mt in 2023. However, in the case of a prolonged war, Ukraine’s crude steel output is expected to total 6.5 million mt in 2022 and 6.1 million mt in 2023, while rolled steel output is expected to amount to 5.9 million mt in 2022 and 5.5 million mt in 2023, and rolled steel exports are expected to amount to 4.1 million mt in 2022 and 3.8 million mt in 2023.
The Metinvest official said that economic activity gradually recovered after the shock of the first weeks of the war, adding that, while 32 percent of all enterprises halted operations in March 2022, in April that number was reduced to 17 percent. However, 60 percent of enterprises operate at below pre-war levels. Mr. Perepelytsia said that, in addition to disrupted logistics and the loss of markets, operations are limited because of curfews, blocked ports, deterioration of payment discipline, and occupied or destroyed capacities.
According to Perepelytsia, Ukraine’s foreign trade dropped by more than half in March this year, including metals exports registering a loss of $880 million in the given month as compared to the monthly average level of 2021. Since the beginning of the war, production in the Ukrainian steel industry has decreased several times, but there was a small recovery in April. Crude steel production in March this year saw an 89 percent year on year decline, while during the first three months the production decreased by 35 percent year on year, and the Metinvest official added that as of mid-May two out of ten plants producing crude steel are in operation. He said that most plants did not produce crude steel in March-April, but some of them are beginning to restart blast furnaces and rolling mills. Currently, around 40 percent of the pre-war capacity of Ukrainian steel production are under occupation or in close proximity to the combat area, including 37 percent of crude steel production, 40 percent of semi-finished steel production and 37 percent of finished steel production. He warned that the products facing the greatest risk include merchant slabs, plate, large sections, rails and rail fasteners.
Domestic steel demand in Ukraine has remained very limited since the beginning of the war, noted Perepelytsia noted, as the sharp decline by more than tenfold in apparent steel consumption in March 2022 as compared to the monthly average level of 2021 due to business shutdowns, disruptions of economic relations with the occupied territories, logistics challenges and difficult access to financial resources. The Metinvest official said that April’s consumption was higher month on month, but was still far from the pre-war level.
As Ukraine’s trade remains limited mainly due to the naval blockade, limited railroad capacity, trade disruptions with Russia, and the introduction of currency restrictions, Ukraine is looking for alternative ways to export metal products, while the capacity of the available infrastructure for steel exports is estimated at up to 500,000 mt per month.