Long-term outlook for Ukrainian steel production remains gloomy - Fitch Solutions

Ratings agency Fitch Solution said: “We maintain a bleak outlook for the Ukrainian steel industry in the coming years, driven by the ongoing conflict in Donbas, which disrupts vital supply chains for steel producers. Overall, declining steel prices and growing protectionism in the steel sector will create further obstacles to the recovery of the domestic industry. Low base effects and restructuring of operations among key producers will result in a slight recovery in production this year, but production will remain well below pre-conflict levels throughout our 10-year forecast period. We believe that the Ukrainian steel industry is likely to remain under pressure in the coming years due to a combination of domestic and global challenges. ”

On the domestic market, the conflict in Donbass continues to be the main deterrent for Ukrainian steel producers. The conflict began in 2014 and affected a significant part of the Ukrainian metallurgical industry, including a number of steel mills and the vast majority of the country's coal reserves, which are located in the Donbass region, and the outbreak of the conflict has seriously affected domestic steel production. For example, up to 55 coal mines out of 150 operating across the country were lost after the outbreak of the conflict, while domestic steel production fell from over 2.82 million tonnes of steel per month in May 2014 to 1.76 million tonnes per month by August. the same year.

The report said: “Although production was slowly recovering in 2015 and 2016, any progress in this direction was hampered in 2017 after the imposition of the Donbas blockade. An official blockade of all goods passing between Ukraine and rebel-held territories in Donbas was imposed by the Ukrainian government in March 2017 after the rebels came under the control of Ukrainian businesses in Donbas. The blockade, which continues to this day, severely disrupted production supply chains for steel producers due to the fact that 66% of the metallurgical coal in Ukraine needed for steel production is located in the separatist-controlled Donetsk and Luhansk regions, and approximately 80% of domestic production iron ore, another key ingredient in steel, is located in government-controlled areas. "

Subdued forecasts for average growth in steel production in Ukraine between 2019 and 2028 compared to the same period last year are based on the assumption that the status quo will continue for the foreseeable future and only in the event of a significant de-escalation of the conflict or the end of the blockade, Fitch has revised�