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Conflict impacting Ukrainian steel industry on exports to Russia

Ukraine’s important steel sector is being rocked by violence in the east of the country, with the crisis sparking fears exports to neighboring Russia could fall 50% this year.

Steel making is centred in the conflict-torn regions of Luhansk and Donetsk, where many factories, mills and mines have been forced to stop work. For months, armed pro Moscow separatists there have clashed with Ukrainian forces, with buildings taken over and others destroyed by artillery fire. The conflict in east Ukraine has also hit transport links into Russia, further slowing exports.

Steel makes up about 15% of the economy of Ukraine, which last year ranked as the world’s fifth biggest exporter. International Steel Statistics Bureau data showed that output fell by more than 7% in the first half of 2014 and exports have been hit. Shipments to Russia slumped by 38% in the first four months of the year.

A Kiev based export trader said that the situation is no picnic. New clients aren’t rushing to the market. Ukraine sold Q3 of its 32 million tonne annual steel production to foreign markets in 2013 and Russia was a major buyer, accounting for around 15% of Kiev’s ferrous exports.

Amid fractious relations between Moscow and Kiev, Russian steelmakers have aggressively lobbied for measures to defend domestic producers from Ukrainian imports. There has also been a flood of new Russian supply.

ISSB data showed that exports of construction product rebar, Ukraine’s main steel product export to Russia, fell 66% in the first four months of 2013.

Mr Serhiy Taruta the governor of Donetsk, said that this week steel shipments to Russia were expected to fall by up to 50% this year, yet expressed confidence that supplies could be redirected to other buyers.

Source – Reuters


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