How seaport blockade affects Ukrainian iron ore industry - study

GMK's research on global iron ore market trends and Ukraine's prospects is based on the findings of a study by the company.

Before the war started, China was the main consumer of Ukrainian iron ore, but due to the blockade of Ukrainian seaports, the supply of raw materials to China became economically unviable. The EU became the key market for ore exports.

In 2022, Ukraine's ore exports to the EU fell by 21.5% to 12.9 million tonnes. In January-April, this figure decreased by 9.7% compared to the same period in 2022, to 4.93 million tonnes, or 19.7% of the total.

In January-June 2023, Slovakia consumed the most Ukrainian ore - 30% (in monetary terms). The Czech Republic was second with 24.7%, and Poland was third with 19.6%. In 2022, Slovakia (19.2%), the Czech Republic (17.3%), and Poland (16.5%) had approximately the same consumption structure of ore exports from Ukraine.

Turkey remains a significant consumer of iron ore from Ukraine. In January-May 2023, our exporters shipped 257.5 kt of ore to this country (+9.4%). In 2022, this figure was 585.2 kt (-50.6%). Last year, Ukraine ranked 4th, or 6.2%, in the ore export market to Turkey.

Global trends and Ukraine

Global iron ore production in 2022 decreased by about 3% to 2.6 billion tonnes. The top three countries in terms of production - Australia, Brazil and China - all showed a decline.

Worldsteel expects global steel demand to grow by 2.3% to 1.82 billion tonnes in 2023. Benchmark Mineral Intelligence predicts an increase in iron ore production in the coming years - by an average of 2.3% per year in 2023-2027.

In Ukraine, iron ore remains one of the few mass export products In the first half of 2023, Ukraine exported 8.3 million tonnes of iron ore, down 51% compared to the same period in 2022. The main reason for this is the blocked Black Sea ports. For comparison, almost 30 million tonnes of ore, or 60% of all iron ore exports in 2021, were exported through the Black Sea ports that are currently blocked.

The overall situation among the major producers is as follows:

- One of the Ukrainian mining and processing plants is currently not controlled by Ukraine;

- Metinvest works only in 35-40% of their pre-war capacity;

- The mining department of ArcelorMittal Kryvyi Rih is at 40%;

- Rudomine is operating at 50% of its capacity;

- KZRK at 40-50% of its pre-war capacity;

- Ferrexpo's iron ore mines are operating at around 50% of capacity.

The systemic crisis in production and exports can only be resolved if the Black Sea ports are unblocked and safe for shipping. As long as they are blocked, additional logistical problems arise.

"Against the backdrop of the cancellation of the grain deal, agricultural exporters are putting even more pressure on cargo flow through the Danube ports and western railway border crossings, reducing the opportunities and volumes of exports of mining and metals products," the study says.