EU Trade Curbs Add to Wartime Woes for Ukraine's Steel Sector

Ukraine's steel industry, a cornerstone of its economy, is confronting a new set of challenges from its closest trading partner. The European Union has tightened trade rules, reducing tariff-free import quotas and introducing carbon tariffs, just as mills like Zaporizhstal struggle to operate under constant Russian bombardment.

Steel has long been a vital export for Ukraine, accounting for roughly 15% of its total outbound shipments. The EU is the primary market, absorbing about four-fifths of that production. After Russia's full-scale invasion in 2022, the bloc suspended import duties, a move that was crucial for keeping plants like Zaporizhstal running.

Now, that support is being scaled back. New EU regulations, effective July 1, have cut annual tariff-free quotas by nearly half, with a 50% duty applied to steel imports exceeding the quota. According to Kyiv-based consultancy GMK Center, the new quota for Ukraine is around 1 million metric tons, a 60% reduction from 2025 trade volumes.

Oleksandr Myronenko, COO of Metinvest Group, Zaporizhstal's parent company, said the industry is seeing a fundamental shift. "Instead of support from the European Union, we face restrictions," he told Varta Wire. He described the measures as part of a growing pile-up of obstacles, including the closure of Black Sea shipping routes and higher domestic rail costs.

The industry's plight was underscored on Tuesday when a Russian strike on Zaporizhstal killed seven workers and forced a temporary shutdown. Such attacks, combined with the loss of the primary export corridor, have driven up logistics costs and forced costly production stoppages. From this month, producers also face a 30% increase in domestic freight tariffs.

Oleksandr Kalenkov, president of industry association Ukrmetallurgprom, said urgent exemptions are needed. "For us to survive until the end of the year, a lot of different things need to happen," he said. Ukraine's Federation of Employers estimates the EU restrictions could cost the country $1.2 billion in foreign earnings and shave 0.6% off GDP.

Inside Zaporizhstal, the focus is shifting. Myronenko said the plant may need to pivot toward producing more pig iron, a semi-finished product not covered by EU quotas. However, this would leave around 50% of plant capacity unused and require reassigning workers. The EU defends the quotas as necessary to protect its own producers, while the carbon tariffs aim to promote cleaner production.

With Black Sea shipping effectively closed, the plant faces extra costs of $30 to $40 per metric ton to import coking coal via European ports. This squeezes less efficient Ukrainian producers out of a competitive market dominated by Turkish, Chinese, and European firms. "Everyone understands the situation in Ukraine," Myronenko said, "but everyone still has their own business, their own people, and they are responsible for them, and so they behave quite aggressively on the market."

Metinvest, majority-owned by Rinat Akhmetov, Ukraine's richest man, employs 36,000 people and is the largest employer in the Zaporizhzhia region. The company's $8 billion, 15-year plan to produce "green steel" is now described as "unrealistic" in wartime. Senior foreman Artem Kalinevych, 36, acknowledged the uncertainty. "As of today it's not clear what comes next, and investment in the development of metallurgy is constrained, so the risks are there," he said. "But we're still moving forward, because we are committed to improving the quality of the products we make and deliver to our customers."