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

Ukrainian production of crude steel in 2022 was only one third of the results of 2021, while exports fell by a factor of three. Speaking about the prospects, experts believe that recovery can be achieved even before the end of hostilities. Necessary steps include the development of existing and the construction of new iron ore mining facilities that are consistent with decarbonization goals both in Ukraine and in Europe.

The restoration of the Ukrainian ferrous metallurgy after the war should be based on a new technological level, and not on the restoration, as it was. Decarbonization of the sector, green energy and integration with the European market are key pillars for unlocking the potential of the sector, and the Ukrainian iron ore segment can be a starting point. “There are quite a few DR/HBI projects announced in Europe, and DR iron ore will be required to supply them. There are not many such suppliers on the market, and Ukraine has every chance to become one of such suppliers, close enough to Europe,” said Artem Baroyan, Engagement Manager at McKinsey & Company, at the Europe-Ukraine Steel and Raw Materials conference. Conference organized by Metal Expert in Warsaw on April 24-25, 2023.
McKinsey believes that the opening of seaports is only the first step towards recovery, and the construction of DR 5.5 million tons per year pelletizing facilities for export and their logical continuation in the form of HBI facilities with a capacity of 3.7 million tons per year can be very profitable not only for Ukraine, but also for the European steel industry. The entire production chain could also be marked by the construction of a new slab mill based on an electric arc furnace, Metal Expert has learned.

According to the company's estimates, Ukraine will have the greatest competitive advantage in the supply of DR grade iron ore products to neighboring countries such as Poland, the Czech Republic, Hungary, Slovakia and Romania. Ukrainian suppliers can be on par with other competitors in delivery to Germany. According to McKinsey, the necessary investments are estimated at $20-40 billion.

So far, only two companies in Ukraine have mastered the production of DR pellets: Ferrexpo and Metinvest. Ferrexpo started production of 0.3 Mt of DR pellets in 2020 and 0.4 Mt in 2021. Last year, the war-affected company again reduced output to 0.35 Mt. production of DR grade pellets from 45,000 tons in 2020 to 617,000 tons 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 workshop with a DRI module and an electric arc furnace at one of our plants, either in Zaporizhia or Mariupol,” Yuriy Ryzhenkov, CEO of Metinvest, said in an interview with the publication. Metal Expert in December 2021. Such a step was supposed to be taken as part of the decarbonization program. The company later said it had to put its announced investment plans on hold, "including the decarbonization roadmap."

Ferrexpo, in turn, announced tougher decarbonization plans to achieve zero gas emissions from iron ore pellet production by 2050.

Despite the fact that Ukraine has a solid potential for recovery, the implementation of this concept will require no less solid resources. The HBI technology requires not only high quality iron ore, but also high energy consumption. Ukraine just reached a zero electricity production deficit in February after repeated Russian attacks on its critical energy system. Moreover, some of the equipment at energy facilities has not yet been restored, and the Ukrainian industry is operating in a reduced capacity utilization mode due to closed seaports.

On the other hand, Ukraine, with the support of Western partners, will at least triple its green energy to 30 GW. In addition, it is planned to build electrolysis facilities with a capacity of 15 GW for the production of green hydrogen. In mid-2022, investments in the national Energy Independence and Green Deal program were estimated at $130 billion.