The association of enterprises “Ukrmetallurgprom” considers it necessary to temporarily ban the export of scrap ferrous metals to provide metallurgical enterprises with strategically important raw materials in the conditions of the ongoing war.
“If scrap metal will remain in the country – more than 500 thousand people will have a job, and the country will have millions of foreign exchange earnings from the export of steel. At the same time, the military also benefits – because metallurgists help the fighters a lot, buying for them equipment and cars, and even producing body armor. Nobody benefits from the export of scrap metal. So now the authorities should be proactive and temporarily ban exports until the situation stabilizes and stops threatening national economic security,” wrote Ukrmetallurgprom President Oleksandr Kalenkov in his column on the Interfax-Ukraine website.
According to him, since the beginning of the war Ukraine’s mining and metallurgical complex has been experiencing the worst crisis since independence. A large part of the enterprises have been seized or destroyed by the occupiers, while others are trying to work under constant shelling and partial loss of capacity. The blockade of sea ports has led to the fact that the geography of customers has almost halved, and with it the volume of supply of products.
Nevertheless, enterprises are trying to hold on and even increase production, because they realize the level of responsibility entrusted to them. More than half a million Ukrainians work in the metallurgical and allied industries, and MMC’s share in Ukraine’s GDP is over 10%.
“But the reality throws up new challenges every time. One of them was the shortage of scrap metal, without which it is impossible to increase the metallurgical production”, – said the head of the association.
He named the reasons for the deficit: the occupation of the eastern regions, where traditionally significant volumes of raw materials have been procured (the volume of this raw materials has decreased by almost 80%). At the same time the export of scrap metal has increased sharply: only in the first two months of 2023 about 25 thousand tons were exported, which is almost 60% more than in November-December 2022.
“Given the growth rate of the export indicator, at the end of the year we may see a figure of 250 or even 300-400 thousand tons of exports – and this is absolutely unacceptable for a market that can barely collect about 1 million tons of scrap metal per year. After all, the industry will require more than a million – even in conditions of incomplete resumption of production,” wrote the president of Ukrmetallurgprom.
“Now the situation with the shortage has worsened and began to lead to temporary, but so far, production stoppages. However, the issue must be resolved. And the volume of production instead of growing, will fall to a minimum. This, in turn, will provoke a spiral of new problems not only for the industry, but also for the economy – because, let me remind you, even in the toughest year of 2021 the MMC enterprises paid to the budgets over 42 billion gon. And this is exactly the funds, for which Ukraine can build up its military potential and win on the battlefield”, stated Kalenkov.
He added that Ukraine, losing money because of the drop in production, does not earn anything from scrap metal export – the raw material is exported via the European Union, where a favorable export duty of EUR3 is applied, and from there it is redirected to the actual customers. To export raw material directly to customers would cost EUR 180 export duties and the Ukrainian budget lost already EUR 350 mln on it. Not surprisingly, the State Bureau of Reconstruction and Development has already taken an interest in the export schemes and has already launched an investigation.
As Mr. Kalenkov explained, 1 ton of scrap metal processed by the president of Ukrmetallurgprom into steel gives 10 times more to the budget than the export duty payable to the EU – about $300 per ton. Therefore, the question whether to export raw materials or leave them in the country for processing, should not be – the benefits are obvious, he summarizes.
As reported in the middle of 2021, Ukrmetallurgprom asked to ban the export of scrap until the end of 2023. With a corresponding request Ukrmetallurgprom appealed to the Prime Minister of Ukraine Denis Shmygal in a letter dated July 8, 2021.
According to the Ukrainian Association of Secondary Metals (UAVtormet), the export of scrap metal in January-February 2023 amounted to 24.8 thousand tons compared to 7.1 thousand tons in January-February 2022 (an increase of 3.5 times).
Ukrainian enterprises increased their consumption of rolled products by 18.7% in January and February 2021, year-over-year, to 766,000 tonnes.
According to a press release from the Ukrmetallurgprom association on Monday, some 110,000 tonnes were imported during this period, or 14.4% of the internal market for the consumption of rolled metal.
“In January and February 2021, the capacity of the internal market amounted to 766,000 tonnes of rolled metal, of which 110,000 tonnes, or 14.4%, accounted for imports. In January and February 2020, the capacity of the internal market was 645,300 tonnes, of which 163,300 tonnes, or 25.3%, were imported. Thus, in January and February 2021, there is an increase in the capacity of the internal market of rolled metal relative to January and February 2020 by 18.7% with a simultaneous decrease in the share of imported component by 10.95%,” the company said in the press release.
In addition, it is noted that the structure of imports in January and February 2021 is characterized by the dominance of flat products over long products (54.55% and 42.82%, respectively); in January and February 2020, on the contrary, the dominance of long products over flat products was observed (54.87% and 42.56%, respectively).
According to Ukrmetallurgprom, in January and February 2021, Ukrainian metallurgical enterprises produced 3.15 million tonnes of rolled metal (100.3% year-over-year), of which about 2.49 million tonnes were exported, or 79.2%. In January and February 2020 the share of exports was 84.7% (2.66 million tonnes with a total production of 3.14 million tonnes of rolled metal).
The share of semi-finished products in export deliveries accounted for 48.84% over two months of 2021, which is slightly lower than the indicator for the same period in 2020 (50.34%). Share of flat products in export deliveries in January and February 2021 significantly higher, year-over-year (35.97% and 30.55%, respectively). The share of long products in export deliveries in January and February 2021 noticeably inferior to the indicator for the same period in 2020 (15.20% in 2021 against 19.11% in 2020).
In January and February 2021 the main export markets of Ukrainian metal products were the countries of the European Union (29.9%), other European countries (23.5%) and the Middle East (9.9%).
Among metallurgical importers the CIS ranks first (53.2%), the EU-27 ranks second (24.9%), and Asian countries rank third (11.6%) over the first two months of 2021.
