Netherlands mining and metals group Metinvest B.V. (Metinvest) has lost more than 40% of its metallurgical capacities in Ukraine and Europe as a result of Russia's special military operation.
“The use of the group’s total potential was reduced by more than 40% due to the war,” said Yury Ryzhenkov, CEO of the company, in his online speech at the Steel Success Strategies 2022 conference in the United States.
He stated that the full-scale Russian military invasion of Ukraine had a significant impact on the enterprises of the Metinvest group, as they are located near the front line and in the war zone, in particular in Mariupol.
According to Ryzhenkov, at present, the capacities of the Northern GOK are used by 23%, the Central GOK - by 83%, InGOK - by 32%, YuGOK - by 24%.
The export volume of GOKs is limited by logistics. MMK them. Ilyich and Azovstal are destroyed and do not work. The capacities of Zaporizhstal are used by 54%, Kametstal - by 74%.
The capacities of Metinvest's European plants, which are used by 75% today, also suffered.
“The decrease in production volumes has led to significant changes in the structure of the steel product portfolio and the direction of sales - they have been reoriented from distant markets to the markets of Central and Eastern Europe. Metinvest is restoring supply chains,” Ryzhenkov explained.
He added that the group already has experience in managing enterprises in a crisis situation during the military conflict in Donbas in 2014-2017, which allows them to prepare enterprises for hostilities, carry out proper conservation and ensure logistics.
“The war in Ukraine has led to significant disruptions in value chains, paralyzed trade in the Azov-Black Sea region. As a result of the shortage of materials, there was a significant increase in prices, as well as a change in the geography of sales for many exporters. Export from Ukraine is complicated by logistical problems due to Russia's military blockade of the Black Sea,"" Ryzhenkov also noted.
According to him, the EU market is heavily dependent on exports from Ukraine and Russia and is likely to suffer the most from the crisis caused by the long military conflict. The redirection of trade flows and the technological rebalancing of steel production leads to another round of rising prices for key commodities at already high price levels in the markets.
The head of Metinvest predicts that in general, a change in the market balance could potentially lead to additional costs for European players up to $100 per ton. In addition, rising energy prices, including gas, coal and electricity, continue to drive high production costs.
The main shareholders of Metinvest are Rinat Akhmetov's SCM Group (71.24%) and Vadim Novinsky's Smart Holding (23.76%), who jointly manage the company.