Zaporizhia Iron and Steel Works may shut down a significant portion of its production lines and reorient production toward larger volumes of semi-finished pig iron, which is not subject to EU quotas, Oleksandr Myronenko, Chief Operating Officer (COO) of the Metinvest Group, told Reuters in an interview.
According to him, abandoning higher-value-added steel products will mean that approximately 50% of the plant’s capacity will be idle, and management will have to urgently seek ways to redeploy workers.
Overall, in addition to the war, the steel plant faces a new threat to its survival – steel import quotas and carbon tariffs (CBAM, the carbon-adjusted mechanism) from the European Union. He acknowledged, however, that the EU’s suspension of import duties following the Russian invasion in 2022 played a decisive role in maintaining stable production at Zaporizhstal, a leading steel producer, and other enterprises.
“Now we see that the situation is changing dramatically. Instead of support from the EU, we are facing restrictions,” Myronenko said.
Under new regulations that came into effect on July 1, the EU has nearly halved annual duty-free import quotas, with steel products imported above the quota subject to a 50% duty.
The COO cited the new measures as part of a series of challenges increasingly pressing the industry, including the closure of shipping routes in the Black Sea and rising costs of domestic rail transport. The latest Russian attack on Zaporizhstal claimed the lives of seven workers and forced the plant to suspend operations. Furthermore, it is noted that frequent attacks are forcing companies to spend significant resources to shut down and restore production. Starting this month, manufacturers will also face a 30% increase in domestic freight rates.
According to Myronenko, due to the effective closure of the Black Sea corridor, the company is forced to import coking coal through other European ports, which increases costs by $30-40 per tonne. As a result, Ukrainian steel producers are losing competitiveness and losing market share to Turkish, Chinese, and European companies.
“Everyone understands the situation in Ukraine, but everyone still has their own business, their own people, for whom they are responsible, so they are acting quite aggressively in the market,” he said, adding that Russian attacks on Metinvest assets, particularly Zaporizhstal, have caused significant damage to production.
Due to the difficult situation, it is unclear what will happen to the company’s 15-year, $8 billion modernization plan, which aims to completely transition to green steel production. Myronenko called this plan “unrealistic” given the war.
Zaporizhstal is one of Ukraine’s largest industrial enterprises, whose products are in high demand both domestically and internationally.
Zaporizhstal is a joint venture of the Metinvest Group, whose main shareholders are PJSC System Capital Management (71.24%) and Smart Steel Limited (23.76%). Metinvest Holding LLC is the management company of the Metinvest Group.