Ukraine’s Zaporizhstal may idle half its capacity to fit new EU steel quotas

Ukraine's Zaporizhstal steel plant has announced plans to reduce its output to comply with new European Union quotas on steel exports. The parent company, Metinvest, says the move could idle up to half of the plant's capacity. This would bring the plant's output down to roughly 1 million metric tons, about 60% lower than its 2025 shipments to the EU.

The EU imposes these quotas to protect its domestic producers from a global steel surplus. For Ukraine, the quotas are particularly concerning, as the country's steel industry has been hit hard by Russian strikes and is now landlocked due to the conflict. The tariff-free quota for Ukraine was halved on July 1, with a 50% duty on any excess.

Steel accounts for about 15% of Ukraine's total exports, with the EU purchasing nearly 80% of it. The Federation of Employers estimates that the quota restrictions could cost Ukraine $1.2 billion in foreign earnings and reduce GDP by 0.6%. To avoid idling more lines, Zaporizhstal will shift its production to lower-value pig iron, which is not subject to the quota restrictions.

However, this switch would require the plant to reallocate its workforce. Metinvest's COO, Oleksandr Myronenko, expressed frustration at the restrictions imposed by the EU, stating that Ukraine faces challenges in finding alternative markets due to its less efficient production compared to cheaper Turkish and Chinese suppliers. The Black Sea route is closed, and importing coking coal now costs $30 to $40 more per metric ton via other European ports.

Rail freight has increased by 30% this month, and an EU carbon charge has been applied to steel imports since January. The majority owner of Metinvest, Ukrainian businessman Rinat Akhmetov, is Ukraine's richest man. The modernization plan to transition to "green steel" is unclear given the wartime conditions. Zaporizhstal is the largest employer in the Zaporizhzhia region, and Metinvest is majority-owned by Akhmetov.

On the plant floor, senior foreman Artem Kalinevych expressed uncertainty about the future of the plant.