Metallurgy should develop in Ukraine, and Azovstal is an integral part of it

The expert told why metallurgy is an important industry for Ukraine

The expert told why metallurgy is an important industry for Ukraine / Photo: Getty Images, Collage: Today

“Azovstal” is the name of this metallurgical plantwho only a little did not live up to his 90th birthday, now the whole world knows.

Director of the GMK Center Stanislav Zinchenko spoke about the future of the legendary enterprise – whether it is necessary to rebuild Azovstal and why Ukraine needs metallurgy.

Stanislav Zinchenko

Stanislav Zinchenko

Why metallurgy should develop in Ukraine

The Krivoy Rog iron ore basin ranks second in the world in terms of iron ore reserves. The Donetsk coal basin is located 300-400 km from it. Nowhere else in the world do iron ore and coking coal occur so close to each other and in such volumes.

Nearby is also the Nikopol deposit of manganese ores, necessary for the open-hearth method of steel production. Nearby are the ports of the Azov and Black Seas, which allow transporting raw materials and products. That is why metallurgy was developing in this region even before Soviet times.

There are very few countries in the world that have iron ore deposits:

  • Brazil;
  • Australia;
  • Russia;
  • India;
  • Canada;
  • Kazakhstan;
  • Ukraine.

Therefore, we have developed and are developing metallurgy, which allows us to receive income from exports. The future of the global metallurgy is highly dependent on the creation of new types of products that will ensure the “green” transformation of the economy. Therefore, the availability of iron ore deposits and DRI pellet production capacity will be a competitive advantage for the Ukrainian economy.

In Ukraine, the mining and metallurgical complex is 9.5% of GDP taking into account both direct and indirect influence through suppliers. Every 14th worker in Ukraine is somehow connected with metallurgy. At the end of 2021, mining and metallurgical enterprises provided more than 1/3 of the export of goods from Ukraine. This industry is the base for the economy of the whole country, metallurgical enterprises are the largest taxpayers.

Why Mariupol

Historically, metallurgical enterprises in Ukraine have been concentrated in certain regions. Mariupol, where 2 metallurgical plants are located, is one of the main metallurgical cities of Ukraine.

Mariupol provided 40% of steel production in Ukraine. Thanks to the activities of industrial enterprises, Mariupol formed up to 2% of Ukraine’s GDP – and this is a direct impact (excluding indirect effects associated with supply chains).

Azovstal Iron and Steel Works was founded in 1933. Before the war, 10.7 thousand employees worked at the enterprise. The work of the plant provided $2.6 billion in exports, or 3.8% of all exports of goods from Ukraine. In total, including the supply chain, Azovstal provided 0.6% of Ukraine’s GDP. Every fifth ton of steel in Ukraine was produced by Azovstal.

It is a world practice to place metallurgical plants near ports. In particular, in Italy, metallurgical plants are located near the ports of Taranto, Pembino, Trieste, in the USA – near the ports of Baltimore and Philadelphia, in South Korea – near the port of Pohang, in China – near the ports of Shanghai, Guangzhou, Qingdao.

Location of steel mills near seaports provides logistical advantages both in terms of the delivery of raw materials and in terms of transportation of finished products. Maritime transport has no competitors when it comes to transporting large volumes of products over long distances.

Transportation by land in this case is not economically feasible. In addition, when transporting by road or rail, it is necessary to spend resources on customs clearance of cargo when passing through the territory of transit states, while there is no such need for transportation by sea.

All metallurgical plants export some part of their products, so there is a need for sea transportation, especially when the cargo goes to distant countries. If the metallurgical plant is located near the port, then there is no need to transport products from the plant to the port by land.

As a result, logistics costs are reduced., the company’s products become more competitive in the world market. The enterprise can sell more and, accordingly, provide a greater contribution to the economy of the city, region, country.

Mariupol is an exceptionally favorable location for metallurgical enterprises. The city is located near the raw material base (coal deposits of Donbass and iron ore deposits of Krivbass). In combination with a good transport infrastructure (railway network and port facilities), this made it possible to develop a metallurgical production that is competitive on the world market.

Due to the work of metallurgical plants in Mariupol, Ukraine provided 30% of pig iron imports to the US and the EU, as well as 40% of slab imports to the EU.

Enver Tskitishvili, CEO of Azovstal, recently said that there are different options for the revival of the plant. Metinvest plans to revive the plant exactly in Mariupol, while the company is considering different locations, not only at the current site.

Metallurgy is the foundation of the economy and a major employer all over the world. My personal point of view is as follows: without large-scale metallurgy, associated mechanical engineering, transport and energy infrastructure, cities will die. They will become small towns, because the inhabitants will have nowhere to work and they will be forced to leave their homeland.

Mariupol is a metallurgical city with a bright history; hundreds and thousands of dynasties of metallurgists worked here. I am sure that the whole world will help rebuild Azovstal, and the steel plant will become a well-known and modern production facility.

Previously, “Today” wrote as planned ship grain from Odessa and de-blockade the Black Sea, and they also said that the Ukrainian authorities are asking to impose sanctions on the Russians because of metal theft.