Russia and China influence the situation of the steel industry in Ukraine

The fighting between the pro-Russian separatists and the military units in Kiev, in the south-east of Ukraine, caused a real blow to the steel industry in Ukraine. Which contributed approximately 15% of the economic production in the pre-crisis period.

Many factories in Donbas, the industrial heart of the country, have been closed or have reduced production capacity. China’s aggressive export policy and Russia’s measures to defend its own steel producers have exacerbated the disappointment of Ukrainian producers.

The steel industry in Ukraine – production decreases

According to the industrial association Metalurgprom, steel production in 2014 decreased by 16.9%. Compared to the previous year at 27.2 million tons. „The main reason for this decrease is the outbreak of hostilities in Donbas in August”. Said Ivan Dzvinka, Eavex Capital Research Associate.

A number of steel plants in the Donetsk region were temporarily shut down. At the same time, the fighting in the region led to a 20-40% reduction in production at two steel mills located in Mariupol, due to the lack of raw materials and logistical problems.

According to Dzvinka, Ukraine’s average daily steel production in August-December decreased by 28.5% compared to the January-July period.

„Other reasons for the decrease in production are the increase in competition on export markets (especially in Russia and the Far East) and a decrease in domestic demand as a result of military operations,” Dzvinka added.

Russia has been actively involved in a process of replacing steel imports in recent years. While China pursued an aggressive export expansion policy in 2014, which negatively affected Ukrainian exporters.

„Indeed, China has significantly increased steel exports in the last half year, especially to the Far East. This puts pressure on the market. ” said Roman Topolyuk – Concorde Capital.

Increased competition also led to a significant drop in Ukraine’s steel exports. „While exports to the Middle East and Europe were very close to the level of 2013, those to the former Soviet Union (especially Russia) and the Far East decreased by 35%”, explains Dzvinka. According to Reuters, Ukraine ranked fifth as the world’s largest exporter in 2013.

Article source: http://blogs.ft.com/beyond-brics/2015/02/04/russian-chinese-influences-add-to-ukrainian-steels-conflict-woes/