By Yusuf Khan

 

Ukraine's steel industry is starting to creep back into operation, as two major producers within the region both announced a restart to production despite the war hampering logistics.

Ukrainian steel company Metinvest said Tuesday that its joint venture with Zaporizhstal, located in Zaporizhia, would be tentatively restarting production at two of its four blast furnaces.

Meanwhile earlier this week, ArcelorMittal, the world's biggest steel maker outside of China, said its plant in Kryvyi Rih was to restart one of its three furnaces at the site. The company was asked to restart production by the Ukrainian government "as part of its efforts to start rebuilding the country's economy."

The restart marks a turning point for Ukrainian industry, which has largely been subject to closures and raw-materials shortages since the invasion started. Many of Ukraine's steel plants have also been close to conflict zones, with some inside Russian occupied territory.

However, traders within the region have indicated that the material is still unlikely to be exported, and Metinvest noted that while Zaporizhia has reopened, production in Mariupol and Avdiivka remains delayed.

"Assets in Avdiivka and Mariupol have reportedly sustained further damage from hostilities in the cities where they are located. Until the active stage of the Russian military aggression is stopped and reliable communications channels with the plants are re-established, it is not possible to assess its impact on the Group's plants," Metinvest said in a statement.

ArcelorMittal added that its restart was still "very much one step at a time," with pig iron production running at roughly 20% normal levels.

Like other commodities, steel prices have been subject to soaring prices with the war in Ukraine upending supply chains that had been established for years. Prices for hot-rolled coil, or HRC, in Northwest Europe--often used as a benchmark for steel prices--have jumped from $943.75 a metric ton on Feb. 24 to $1348.50 a ton on April 11. This represents a 42.8% rise according to price reporting agency, Argus Media.

Raw materials like iron ore have also jumped following the invasion, with futures prices in New York rising to a high of $161.84 a metric ton on April 4 from $141.76 a ton on Feb. 25, the day after the invasion began.

Iron ore producer Ferrexpo last week said its operations have remained outside the conflict zones and so production as well as deliveries via rail and barge have been able to mainly continue--with exception of exports from the port of Pivdennyi in Southwest Ukraine which remains interrupted. Ferrexpo is "currently tailoring production to match accessible sales," a spokesperson told Dow Jones Newswires.

Soaring prices for energy have also been a key concern for Ukrainian steel mills, again adding to the swathe of issues for the region's sector.

Metinvest last year had produced 9.5 million tons of crude steel, with the World Steel Association placing it as the 45th largest steel producer in the world and the third largest European-based company behind ArcelorMittal and Thyssenkrupp AG.

 

Write to Yusuf Khan at yusuf.khan@wsj.com

 

(END) Dow Jones Newswires

April 12, 2022 12:32 ET (16:32 GMT)

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