Ukraine does not have excess production capacity
The European Union is preparing new rules for access to the steel market, which poses additional challenges for Ukrainian exporters. Against the backdrop of the implementation of the CBAM mechanism and new protective measures, questions arise regarding the survival of the domestic mining and steel sector and the logic of European integration amid the war. Why is Ukraine not a threat to EU producers, how do hidden imports from Russia work, and why will the restrictions harm Europeans themselves?
Andriy Kril, Head of International Relations at Metinvest, addressed these issues during his speech at the online discussion “The EU is changing the rules for steel market access: what does this mean for Ukraine,” organized by the Institute for Economic Research and Policy Consulting (IER). GMK Center presents the key points of his speech.
Ukraine is not a source of overcapacity
The first aspect to note concerns the potential threat from Ukraine to the European steel market. It is important to emphasize: Ukraine is not a source of overcapacity.
Within the framework of the OECD’s Global Steel Capacity platform, Ukraine has historically been listed as a significant source of capacity—at around 40 million tons. However, this year the OECD officially acknowledged that Ukraine’s current production capacity stands at only 8 million tons.
This represents a reduction of more than four times. With such a level of installed capacity, Ukraine objectively cannot pose any threat to the EU market—especially given that the draft of the new EU regulations itself provides for a permitted import volume of 18 million tons under the new regulatory measures.
The EU’s inconsistent stance on Russia and Ukraine
Despite the fact that the European Union has adopted a series of tough sanctions against Russia, it has simultaneously allowed the import of semi-finished ferrous steel products (specifically, slabs) of Russian origin until the end of 2028, at an average annual volume of approximately 2.5 million tons of slabs.
In effect, this amounts to a disguised import: by the end of 2028, Russia will be able to supply steel slabs to the EU, which will be used to produce rolled and sheet steel directly at plants in EU member states.
Against this backdrop, the imposition of restrictions on Ukraine—a country that is a victim of Russia’s armed aggression—appears inconsistent and raises serious questions.
The doubleimpact of CBAM and the threat to industry performance
The primary concern is the double negative impact of the CBAM (Carbon Border Adjustment Mechanism). First-quarter results have already shown a significant drop in shipments from Ukraine.
If quota restrictions are added to this in the middle of the current year, the aggregate performance of the Ukrainian steel sector for the year may turn out to be unsatisfactory.
Integration of Ukraine’s and the EU’s steel sectors
A key factor that is often deliberately overlooked in discussions by certain European partners is the long-standing process of mutual integration between Ukraine’s mining and steel sector and that of EU countries.
Late last year, Metinvest acquired a pipe plant in Romania that had previously belonged to the ArcelorMittal group and was in a difficult financial and operational situation. The facility is currently being restored and brought back to normal operations. This is creating a production chain between Ukrainian and European facilities.
Interpipe is following a similar path, having also recently acquired a plant in Romania. Consequently, another Ukrainian company is integrating its supply chain into the “Ukraine–EU” cooperation framework.
After losing access to Pokrovsk, Metinvest began actively purchasing coke in Poland and is now one of the largest buyers of Polish coke. These supplies come from Polish state-owned enterprises that are in a difficult financial and economic situation.
That is why any impact on steel trade flows between Ukraine and the EU—whether due to CBAM or the New Steel Measures—will have a direct negative impact on companies located in the EU member states themselves. This interdependence is evident and supported by concrete examples.
Restrictive measures in the context of Ukraine’s European integration
The fundamental question is this: how does the gradual introduction of restrictive measures—first the CBAM and, starting this July, the new market access conditions (New Steel Measures)—fit into the context of Ukraine’s integration into the EU single market and its accession to the Union?
Are these measures too drastic? If access to the EU market is restricted now, a significant structural “gap” will form between the current state and the expected status—sectoral integration or full membership.
It would be prudent to consider ways to avoid this gap and ensure a smoother transition from the current state to full integration. Such an approach would help support Ukraine’s economy during wartime and facilitate the gradual and managed integration of the steel industry into the single market.