Administrative Ban on Scrap Exports: The Key to Stabilizing Ukraine’s Strategic Raw Materials Market

Ukraine’s scrap metal export policies have become a point of contention within the steel industry. Valentyn Makarenko, CEO of Interpipe Vtormet, highlighted the growing issue of scrap exports and their negative impact on the domestic market. The ongoing shortage of ferrous scrap undermines Ukraine’s economic stability and national security.

Impact of Scrap Exports on Ukraine’s Steel Industry

Ukraine’s steel sector struggles to secure enough raw materials due to increasing scrap metal exports. This has worsened the shortage of critical raw materials in the country. Makarenko pointed out that the closure of the Pokrovsk coal mining group and the rise in coking coal imports have complicated matters further. Steel mills previously offset scrap shortages by using more pig iron, but this is no longer economically viable.

Scrap plays a vital role in decarbonization and efficient steel production. The electric arc furnace (EAF) method, which relies heavily on scrap, is the most efficient and competitive process for European markets. As a result, EU regulations are focused on keeping scrap within its borders to support sustainable production methods. This shift highlights the importance of maintaining local scrap supplies for industries like Ukraine’s steel sector.

Why an Export Ban Is Crucial for Ukraine’s Future

Makarenko supports a state-level administrative ban on scrap exports as the only viable solution to stabilize the domestic market. He noted that the shortage of scrap is mainly managed through extended downtimes at large industrial complexes, which is unsustainable. Unlike quotas or tariffs, which could lead to corruption and market manipulation, a total export ban would quickly stabilize the market and ensure the steel industry has access to necessary resources.

Economically, exporting one ton of scrap deprives Ukraine of five times the foreign exchange earnings it could earn from exporting finished steel. Additionally, domestic steel production provides significant added value to the economy, including wages, taxes, and energy costs. Processing scrap domestically, rather than exporting it, would provide substantial benefits.

Economic and National Security Implications

The discussion around banning scrap exports goes beyond market factors. Makarenko emphasized that Ukraine is now integrated into a global economy that increasingly favors protectionist measures. These policies, including tariffs and other barriers, often conflict with previous trade agreements. Ukraine must act decisively to ensure the country’s survival, especially in light of ongoing geopolitical challenges. While an export ban may be politically unpopular, it is economically justified and necessary for Ukraine’s long-term stability.

SuperMetalPrice Commentary:

Valentyn Makarenko’s insights on Ukraine’s scrap export dilemma shed light on a crucial issue in the country’s industrial strategy. With rising global competition for scrap metal and a global shift towards sustainable steel production, Ukraine’s decision to impose a ban on scrap exports could have far-reaching consequences. This policy would secure essential raw materials for the steel industry while strengthening the country’s economic resilience. As global markets evolve, Ukraine’s scrap metal policies will play a pivotal role in shaping the future of its steel sector.