Zaporizhzhia, Ukraine — In this eastern Ukrainian city, a Soviet-era mural stands boldly across from Zaporizhia metallurgical plant.
The fresco shows muscular craftsmen handing a freshly forged sword to equally muscular soldiers rushing off to war. However, today the metallurgical industry of Ukraine is in a difficult state due to the war itself.
For most of the 20th century, central and eastern Ukraine was a bustling industrial center fueled by rich coal mines and large, cumbersome steel plants. In some parts of the country, these plants still dominate the landscape, local economy and even civic identity. Iron and steel production remains the second largest industry in Ukraine after agriculture. And before the Russian invasion this year, it was a major supplier of iron ore to Turkey, China and some European Union countries.
Although the war with Russia has raised serious international concerns about Ukraine’s massive production of wheat, corn and sunflower oil—normally major exports— to world markets, the invasion was even more devastating for the nation’s steel structures. The export of iron ore, for example, which is transported by tons on large cargo ships, has completely stopped from Ukrainian ports.
Only half of the blast furnaces are working at the plant
Inside the sprawling Zaporozhstal industrial complex, the plant’s giant blast furnaces routinely turn tons of raw iron ore into a stream of molten orange cast iron.
But the head of the blast furnace workshop, Siarhei Safonov, says that now only two of the factory’s four blast furnaces are working.
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The furnaces are designed to run continuously, he says, and typically never shut down during their 30-year lifespan. But earlier this year, all four furnaces had to be returned to what Sofonov calls “low idle” because Russian troops threatened to advance on Zaporozhye. Moscow forces never reached this area, but tens of thousands of people fled. Much of the city has ground to a halt, and the factory, which once employed 11,000 workers, is now operating at less than 50% of its capacity.
Yuri Ryzhankov, CEO of the Metinvest Group, which owns the Zaporozhstal plant, says that they have enough raw materials inside Ukraine to continue pumping out rolls of sheet metal and cast iron. The problem is that they cannot bring these products to market. Metinvest and other Ukrainian steel producers now have huge stocks of processed metal in Ukrainian warehouses.
“The main difficulty is logistics,” Ryzhankov says. Traditionally, all Ukrainian steel enterprises, the largest of which is Metinvest, export their products through the Black Sea or Azov ports. “At the moment,” Ryzhankov says. “Ports Blocked by Russians.”
There is no steel delivery deal
Although several ships carrying grain have recently been allowed to leave Ukraine, there is still no agreement to allow vessels carrying other cargoes in transit through the Black Sea.
Some steel and iron ore are shipped by rail to ports in Poland and Romania, but this is a slow and expensive process. In addition to logistical problems, Ukrainian railways operate on a different track than Western European railways, which means that goods must move across the border.
“It was never considered as the main export route for the steel industry of Ukraine,” Ryzhankov says.
As difficult as it may be to deliver steel to customers in Turkey, Italy and North Africa, the Zaporozhye plant is at least still in the hands of Metinvest.
Russian and Moscow-backed separatist forces seized two of the company’s steel mills in Mariupol. This includes Azovstal factory where Ukrainian soldiers opposed the Russian occupation of the city. Russian troops destroyed the mill in order to seize it and finally take full control of the southern port city.
While Azovstal is better known now, it was the smaller of the two Metinvesta steelworks in Mariupol. Another, the Ilyich metallurgical plant, occupied a larger area and had more workers than Azovstal with 14,000 employees. Ilyich was captured by Russian troops in April. Ukrainian fighters held out at “Azovstal” until the middle of May.
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“At some point, we will return to Mariupol and see the condition of Azovstal and the Ilyich plant, whether they can be restored,” he says.
The plants were insured, “but insurance usually doesn’t cover wartime risks,” he says. “And that’s a big problem.”
Ryzhenkov says the company’s lawyers are looking for ways to file a lawsuit against the Russian Federation for billions of dollars in damages, but shrug it off as if it’s a scam.
There is no final tally of the monetary damage in Mariupol, but the human suffering after months of bombings has been immense. Ukrainian officials say more than 20,000 civilians have been killed during the Russian siege of the city. UN officials have documented fewer civilian casualties, but still believe the death toll in the city is in the thousands.
Due to the fact that the city is under the control of Russia, Metinvest has urged customers around the world not to buy Mariupol steel. The company says there is a “high probability” that occupying Russian forces will sell off some of the more than 200,000 tonnes of Metinvest metal products stored at two factories there.
Earlier this year, Metinvest paid its idle employees two-thirds of their wages, including at the Mariupol plants now controlled by the Russians. But in June, the company had to lay off thousands of workers.
With limited profits, two of its largest factories out of business, and few opportunities to export its industrial products to customers abroad, Ryzhankov says the company is now simply focused on survival.
“We’re making sure everything we still have control over is kept intact,” he says.
“And we expect that Ukraine will, as it were, win the war and return what belongs to it.” But he has no illusions that it will happen soon.
Factories and raw materials are behind enemy lines
The problems facing Metinvest are similar to other Ukrainian steel and industrial enterprises, especially in the east of the country.
“There are a number of really problematic trends that will intensify over time,” says Andrew Losen, who until last year worked in Ukraine as an observer and analyst for the Organization for Security and Cooperation in Europe.
“One of them is the fact that these industries depend heavily on coal that is mined behind enemy lines now or close to the fighting.”
He says Ukraine’s industrial capacity is now severely strained because much of its manufacturing sector is in or near intense fighting in eastern Ukraine.
That’s part of Metinvest’s problem. Until 2014, “Metinvest” was located in the eastern Ukrainian city of Donetsk. With the support of Russia separatists seized Donetsk in 2014, Metinvest moved its headquarters to Mariupol, a city on the Sea of Azov. This year, when Russia captured Mariupol, the headquarters was moved again, this time to the capital, Kyiv.
Ryzhankov sometimes sounds tired, talking about the consequences of the war, export bottlenecks, assets stolen by the Russians, layoffs. But when asked if the company will somehow be able to resume operations in Mariupol or elsewhere near the front lines, he is quick to respond.
“The position of our shareholders on this is very clear,” he says. “We will not operate on any occupied territory or under any occupation regime.” He insists that they will operate only in areas controlled by Ukraine.
Anna Palomarenko participated in the preparation of this report.