Suffering from emissions, how Ukrainian metallurgy is losing the EU market

ArcelorMittal Kryvyi Rih closed one of the rolling shops of its steel plant.The company cites the new EU carbon tax CBAM (Carbon Border Adjustment Mechanism) as the reason for the closure. Starting from January 1, 2026, all companies exporting steel products to the European Union will have to pay it. The tax reaches up to EUR 100 per ton of emissions. This is a critical issue for Ukrainian steelmakers: they operate old equipment that produces large amounts of harmful emissions.Now the European market is becoming closed to some Ukrainian steel. Why this happened, how it will affect Ukrainian companies, and whether the Ukrainian government is doing anything to solve this problem, read in the article LIGA.net.How much will Ukraine lose The carbon tax could cost Ukraine up to $5 billion in export losses over five years, due to a possible halt in exports to the EU, according to GMK Center. This amount is equal to the average annual volume of rolled steel exports to the EU.The purpose of the CBAM is to motivate industrial companies to reduce carbon emissions. The tax started in 2023, with a transition period until 2026.European factories have been operating under the ETS (emissions trading system) for two decades and paying for each greenhouse gas emission. The additional tax was introduced to avoid carbon leakage, when European products lose out to cheap imports from countries where they do not pay for the environment.Currently, Ukraine's carbon tax is only UAH 30 per ton. The CBAM for exports of Ukrainian steel to the EU will reach EUR 86 to 100 per ton of emissions. At this price, the amount of payment for one company could reach 200 million euros per year, suggests LIGA.net CEO of the consulting company Metals Consulting Int. Alexander Sirik."The only way to avoid paying this money is to modernize," he says, "The most efficient way is to switch to electrometallurgy (electric furnaces). According to him, a traditional converter produces about 2 tons of emissions per ton of steel, while an electric furnace produces only about 0.5 tons.Read alsoDark times of industry. How Zhevago, Akhmetov, and Pinchuk's companies operate without electricity"Full decarbonization is an extremely long and expensive process that requires billions of dollars and many years. In the context of the war, Ukrainian companies do not have access to the necessary financial resources to upgrade their equipment," adds Denys Sakva, an analyst at Dragon Capital.Why it is criticalThe EU is a key market for the Ukrainian steel industry. About 80% of Ukraine's metal exports go to the European Union, Sakva said.Metallurgy and mining account for 7% of GDP, 15% of exports, and 30% of rail and port cargo turnover."The EU market is very important for Ukrainian producers, but as a result of the ongoing aggression, Ukrainian industry is in incomparably worse conditions than any other exporter to the EU," – metinvest's press service said.Metinvest did not stop production because of the tax, but rather reconfigured some processes.In addition, Metinvest adds, major global steelmakers have the flexibility to redistribute higher-carbon-intensity products to third markets while supplying products from lower-carbon-intensity facilities to the EU.Ukrainian producers do not have such an opportunity due to the key role of the EU market for sales and the lack of alternative production facilities that would allow for such optimization.Read alsoA city for life or for death? A report from Kamianske, Dnipro region"It is critically important for Ukraine that the Government continues the dialogue with the European Union on the special procedure for the application of the DCFTA to Ukraine." – metinvest added.There are no specifics from the stateSuch communication exists, they assured LIGA.net in the office of the Deputy Prime Minister for European Integration Taras Kachka.It is currently at the stage of document processing. "The Ukrainian side has received a document from the European Commission's Directorate-General for Taxation and Customs Union that summarizes the assessment of the projected impact of CBAM on Ukraine," the Deputy Prime Minister's office said. It is this document that is being studied by the Government.The company plans to meet with EU Climate Commissioner Vopke Gukstra to work out possible additional ways to minimize the negative effects of CBAM for Ukrainian producers, Kachka's office said.However, it is not known when it will take place.In the meantime, not only steelmakers but also producers of cement, fertilizers, aluminum, and electricity are preparing for losses from the suspension of exports to the EU.

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