Ukraine’s seaborne iron ore shipments have stabilised this year, and are outmuscling Russian supply in China and Turkey, but there is little room for further growth due to electricity and labour shortages, according to GMK Center chief executive Stanislav Zinchenko.
Following the outbreak of war with Russia, Ukrainian exporters creatively turned to shipping cargoes by river to Romanian Black Sea Ports or by rail to Polish Baltic Sea ports for onward shipment. While this did not lead to increased export volumes, it was “key” to miners’ survival in 2022 and 2023, Zinchenko said at the Fastmarkets International Iron Ore & Green Steel Summit 2024 conference in Vienna attended by Kallanish.
Since the Ukrainian sea corridor was set up, several successful cases of shipment have enabled reduced insurance costs and seen iron ore shipments return to 50% of pre-war volumes, with lead times also back to pre-war levels.
While Ukrainian volumes are recovering, Russian iron ore export geography has narrowed, Zinchenko noted. Ukraine accounted for over 50% of iron ore pellet tonnages imported by Turkey in the first quarter, while Russia-origin imports fell 70%. In China, Ukraine recovered to supply more iron ore than Russia. In Europe, despite no sanctions on iron ore, “steelmakers are voluntarily refusing to import from Russia,” Zinchenko said. Lower European sinter feed demand is however impacting Ukrainian miners, he added.
The ceo says electricity shortages, amid Russian attacks on Ukrainian energy infrastructure, will prevent Ukrainian iron ore export growth. At least 80% of electricity needs are supplied from the EU, making energy in Ukraine costlier than it is in the bloc. If iron ore prices drop below $100/tonne, therefore, Ukrainian exports will become unprofitable and output will decline.
Moreover, labour shortages due to army conscription will hamper any expansion of operations.
Ukraine could however position itself as a supplier of green metallics after the war ends. While the green DRI making push started in Europe, the momentum is shifting to the Middle East thanks to the region’s ideal conditions. Ukraine is also well-suited to provide this material. The country has the potential to supply 20-25 million tonnes/year of low-emission merchant DR feed, but the demand for this has to be created and premiums agreed on, he concluded.
Adam Smith Poland
