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Ukrainian steel companies reduce production, logistics bottlenecks are difficult to break in the short term

From April to May, major Ukrainian steel mills basically began to resume production one after another. However, until mid-July, due to insufficient cash flow support, superimposed high energy and logistics costs, and the pressure of high inflation, the production activities of some steel mills were limited. Led by the Kamestal steel plant of Ukraine’s Metinvest Group, it was forced to shut down one blast furnace in May and the second in July, leaving only one blast furnace remaining in operation.

On the whole, the current logistics problem is still the biggest difficulty facing steel exports. First of all, the ports previously exported to Europe are currently inaccessible. In addition, Ukrainian governments at all levels are giving priority to exporting crops, and the European Commission also stated that Ukrainian agricultural products will be prioritized for shipment at the terminal. As a result, the export of steel products has slowed down, a large amount of goods have been backlogged in ports, it is difficult for steel mills to realize cash flow, and the cash flow is insufficient. Under the background of cost support, production has to be reduced.

At the same time, Ukrzaliznytsia, the state-run railway operator in Ukraine, imposed a policy of 70% higher tariffs, which made the logistics cost of steel even worse. According to Mysteel’s incomplete calculations, railway transportation costs may increase by nearly 300%. With such high logistics costs, even if the port resumes normal operation, it will take a long time for steel mills to restore their original production levels.


Post time: Jul-28-2022
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