How loss of Pokrovsk will affect Ukrainian steel industry: The Economist explains

The Economist reports.

‘Along with its associated plants and administration buildings, the Pokrovsk mine group employs 6,000 people, of whom some 1,000 are currently serving in the armed forces. It is the largest coking-coal mine in Ukraine. Its coal, used for smelting iron ore, is vital for the country’s remaining steel industry,’ the publication explained.

Metinvest, an international group of mining and metals companies with operations in Ukraine, Italy, Bulgaria, the UK and the US, planned to produce 5.3 million tonnes of coal at the mine in 2024.

‘In 2023 Ukraine’s steel plants produced 6.2m tonnes of crude steel. In 2021 though, before the loss of the two Mariupol plants, Ukraine had produced 21.4m tonnes. In 2021 Ukraine was the world’s 14th largest steel producer but last year it had tumbled to 24th,’ the report said.

According to analyst Andriy Buzarov, even without the physical seizure of the mine, Russia can paralyse its operation by interrupting power supply and shelling transport routes. According to his forecasts, the next target could be a mine in Dobropillya.

According to Ukrmetallurgprom CEO Oleksandr Kalenkov, the loss of the Pokrovsk mine could reduce steel production to 2-3 million tonnes in 2024 instead of the projected 7.5 million tonnes. This will lead to significant economic losses, given that steel accounted for a third of Ukraine's exports before the war.

Yuriy Ryzhenkov, Metinvest’s CEO, has said in an interview with Forbes Ukraine in September that if Pokrovsk were lost, the company could still source some coking-coal domestically; but it would be forced to import the rest, which would make Ukrainian steel too expensive for some markets.As a consequence, the industry and the government would lose revenue.

Mr Ryzhenkov noted that “some say ‘Look, we lost Mariupol and nothing happened.’ But this is not true. We have lost a serious part of our GDP. It’s just that we are now being financed by our partners, so we haven’t yet realised that we have much less money in the budget. And it would be the same story here.”

• On October 4, the head of the city's military administration, Serhiy Dobriak, said that 80% of the infrastructure in Pokrovsk, Donetsk region, had been destroyed or damaged by Russian shelling.