Two plants make 70% of Ukraine’s steel. Russia hit both. Then ports closed, rail costs rose 30%, and the EU’s carbon tax kicked in

In the span of a month in August, Russian missile strikes crippled four of Ukraine's largest steel plants, slashing steel production by half. The Azovstal plant in Mariupol, a key steel mill, was already lost to Russian forces, and the ongoing war has disrupted production across the industry. The latest attacks hit plants that make up 70% of the remaining capacity, sending the steel sector into a deep crisis.

On August 11, Zaporizhstal, Ukraine's largest steel plant, sustained a strike that killed seven workers and injured 21. A second strike on August 27 resulted in two deaths and 13 injuries. ArcelorMittal Kryvyi Rih and Kametstal also suffered significant damage, with ArcelorMittal Kryvyi Rih partially shutting down.

The strikes coincided with a Black Sea port blockade, a 30% increase in rail tariffs, and the upcoming EU carbon tax. These factors combined to create a perfect storm for Ukraine's steel industry. To cope with the challenges, Zaporizhstal may idle half its capacity to comply with new EU steel quotas.

Compounding the dire situation, Türkiye is re-rolling Russian slabs and selling the resulting steel domestically, while China uses cheap Russian energy to undercut Ukrainian prices. Ukraine's steel sector contributes to 6% of the country's GDP, brings in 13% of foreign-currency earnings, and has paid UAH 27 billion (approximately $606 million) into state budgets between January and July.