Ukraine's steelmakers fret as Russians advance towards key coal mine
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1 of 2 A view shows a destroyed bridge in the town of Pokrovsk, amid
Russia's attack on Ukraine, in Donetsk region, Ukraine September 17,
2024. REUTERS/Anton Shynkarenko/File Photo
[1/2]A
view shows a destroyed bridge in the town of Pokrovsk, amid Russia's
attack on Ukraine, in Donetsk region, Ukraine September 17, 2024.
REUTERS/Anton Shynkarenko/File Photo Purchase Licensing Rights - Coking coal mine is vital for Ukraine's steel industry
- Metal exports raised almost $2 bln in January-August 2024
- US, South African coking coal imports would push up costs
KYIV, Oct 16 (Reuters) - As Russian forces grind their way towards the strategic supply hub of
Pokrovsk in eastern
Ukraine, they are also approaching a coking coal mine that fires the country's vital steel industry.
Russian
troops have moved to within around 12 km of Pokrovsk, overwhelming
Ukraine's stretched defences with vastly superior numbers and equipment.
Thousands of residents have fled and key road and rail links to other
cities risk being severed.
Around
10 km west of the town centre lies a mine that produces a special type
of coal needed to produce coke, an essential element in steelmaking -
which is second only to agriculture in earning hard currency for
Ukraine.
Metal
exports were worth almost $2 billion in the first eight months of this
year, according to trade data, money needed to keep Ukraine going two
and a half years into Russia's full-scale invasion.
Oleksandr
Kalenkov, head of Ukraine's steelmakers' association, said the loss of
the Pokrovsk mine, the only domestic source of coking coal, could cause
steel production to slump.
"We
could make up to 7.5 million metric tons of steel by the end of the
year and, for next year, we saw an increase in production to over 10
million," Kalenkov told Reuters.
"But if we lose Pokrovsk, then ... we will fall to 2-3 million tons."
The dire
warning is a reminder of how Russia's invasion is targeting Ukraine's economy, posing an existential as well as a territorial threat.
The
head of the Ukrkoks coke association, Anatoliy Starovoit, said Ukraine
produced about 3.5 million tons of coke in 2023 and used coking coal
mined exclusively in Pokrovsk.
"We
don't know where to get coal if Pokrovsk is seized," he told Reuters.
"It is difficult to bring it in by importing; today it is not so easy to
bring it in by sea."
IMPORT, EXPORT
Ukraine
has several deep-water ports on the Black Sea, but steelmakers would
find it difficult to import significant volumes of coal because of
military risks and because ports are built for exports rather than
imports.
To do so would also push up production costs for steelmakers, Kalenkov said.
"There will be imports, of course, but there won't be enough imports."
The most likely alternative sources of supply are the United States and African countries including South Africa, he added.
Some producers have been stockpiling as a precaution against possible supply disruptions.
"We
have replaced the deficit in the local market for coal with imported
raw materials, but we maintain high reserves," ArcelorMittal Kryvyi Rih,
Ukraine's largest steelmaker, said in a statement. The company is part
of ArcelorMittal S.A.
(MT.LU), opens new tab, a Luxembourg-based multinational steel manufacturing corporation.
A
steel industry source said producers hoped to find alternative sources
of coke coal from elsewhere in Ukraine should the Pokrovsk mines be
occupied, but that imports would inevitably be needed and increase
production costs, making steel less competitive.
Ukraine
produced more than 4.3 million tons of rolled steel products in
January-August 2024, of which 66% were exported. EU countries accounted
for 72% of the volume exported, according to the steelmakers' union.