Europe-Ukraine Steel and Raw Materials Conference: Recovery of Ukrainian metallurgy in hands of green technologies

The full-scale war started by Russia last year brought tremendous damage to the Ukrainian steel industry with crude steel production accounting for only one-third of the 2021 results and export volume falling three-fold. Talking about the prospects, experts believe that recovery might be achieved even before the end of hostilities. The necessary steps include developing the existing and building new iron ore facilities that meet decarbonisation targets in both Ukraine and Europe.

Rebuilding the Ukrainian steel industry in the aftermath of the war should be based on a new technological level, not on rebuilding as it was. Decarbonisation of the sector, green energy and integration with the European market are the key pillars for unleashing the sector’s potential, and the Ukrainian iron ore segment may become the starting point. “There are quite a lot of DR/HBI projects that have been announced in Europe and they will need DR-grade iron ore to be supplied. There are not a lot of such suppliers in the market and Ukraine is well-positioned to be one of these suppliers, one quite close to Europe,” Artem Baroyan, engagement manager at McKinsey & Company, mentioned at Europe-Ukraine Steel and Raw Materials Conference, held by Metal Expert in Warsaw during April 24-25, 2023.

McKinsey believes that opening seaports is only a first step on the way to recovery, while construction of 5.5 million tpy DR pellet capacity for export and its logical extension in the form of 3.7 million tpy HBI facilities may be highly beneficial for not only Ukraine but also the European steel industry. The whole production chain may also be marked by the construction of a new EAF-based slab mill, Metal Expert has learnt.

The company estimates that Ukraine will have the greatest competitive advantage in supplying DR-grade iron ore products to neighbouring countries such as Poland, the Czech Republic, Hungary, Slovakia, and Romania. Ukrainian suppliers might be on par with other competitors in shipping to Germany. The required investments are estimated at $20-40 billion, according to McKinsey.

Only two companies in Ukraine have mastered the production of DR pellets so far: Ferrexpo and Metinvest. Ferrexpo started manufacturing DR pellets in the amount of 0.3 million t in 2020 and 0.4 million t in 2021. Last year, being affected by the war, the company reduced output again to 0.35 million t. Metinvest’s Central GOK boosted production of DR-grade pellets from 45,000 t in 2020 to 617,000 t in 2021.

Before the invasion, Metinvest planned to enter the DRI segment as well. “We hope that by 2030, we will be able to launch at least one facility with a DRI module and an electric steelmaking facility at one of our plants – either in Zaporizhia or Mariupol,” Yuriy Ryzhenkov, Metinvest CEO, said in the interview to Metal Expert in December 2021. Such a step was intended to be made in line with the decarbonisation programme. Later, the company said it had to put on hold announced investment plans, “including the decarbonisation roadmap”.

Ferrexpo, in its turn, announced tighter decarbonisation plans to achieve zero gas emissions in iron ore pellet production by 2050.

Even though Ukraine has a solid potential for recovery, the implementation of the mentioned concept will need no less solid resources. HBI technology not only needs high-quality iron ore but also generates high energy consumption. Ukraine had just achieved zero-deficit electricity production in February, after permanent Russian attacks on its critical energy system. Moreover, some of the equipment at energy facilities is still not restored, and the Ukrainian industry is operating at reduced capacity utilisation due to blocked seaports.

On the other hand, Ukraine with the support of Western partners will boost the green energy industry at least three-fold to 30 GW. In addition, there are plans to build 15 GW of electrolysis capacity to produce green hydrogen. In mid-2022, investments in the national Energy Independence and Green Deal programme were estimated at $130 billion.