Ukraine's iron and steel industry is in rough shape because of war : NPR

2022-09-03 02:25:43 By : Mr. Jonathan Bian

The roots of Russia's invasion of Ukraine go back decades and run deep. The current conflict is more than one country taking over another; it is — in the words of one U.S. official — a shift in "the world order." Here are some helpful resources to make sense of it all.

There's been a lot of focus on how the war in Ukraine is affecting its most important industry - agriculture. The country is traditionally one of the world's largest exporters of wheat, corn and sunflower oil. But as NPR's Jason Beaubien tells us, war is also having a devastating effect on Ukraine's second leading source of export revenue - its iron and steel industry.

JASON BEAUBIEN, BYLINE: During Soviet times, Ukraine was sort of the Pittsburgh of the USSR. It was the industrial heartland built around coal mines and big, hulking steel mills. And in several parts of Ukraine, these mills still dominate the landscape, the local economy and even civic identity. In the city of Zaporizhia, Zaporizhstal Steel Plant is a gray industrial complex sprawling over more than two square miles. Every day, the plant's giant blast furnaces convert tons of raw iron ore into a stream of molten orange pig iron and liquefied slag byproduct.

SERHIY SAFONOV: (Through interpreter) So here in this place, they are divided. And the cast iron goes here, and slag goes there.

BEAUBIEN: Serhiy Safonov, the head of the blast furnace shop at Zaporizhstal, says earlier this year all four of the plant's blast furnaces had to be dialed back to what he calls a low idle as Russian troops got close to the city. Those forces were pushed back, but the plant is still operating at less than 50% of capacity. Officials say they have enough raw materials inside Ukraine to keep pumping out rolls of sheet metal and cast iron bars. But they now have a huge backlog of processed metal sitting in Ukrainian warehouses.

YURIY RYZHENKOV: The main difficulty is logistics.

BEAUBIEN: Yuriy Ryzhenkov is the head of Metinvest Group, which owns the Zaporizhstal Plant.

RYZHENKOV: Traditionally, our company, any company in Ukraine are exporting the steel and iron ore via the Black Sea ports or Azov Sea ports. At the moment, the ports have blocked by the Russians.

BEAUBIEN: While a few ships carrying grain have been allowed to leave Ukraine recently, there's still no agreement to allow vessels ferrying other goods to transit the Black Sea. Some of the Ukrainian steel is getting sent by rail to ports in Poland and Romania, but it's slow and expensive. And adding to the logistical challenges, Ukraine's railways operate on different gauge track than the Western Europeans, meaning cargo has to get transferred at the border.

RYZHENKOV: This was never envisaged as the main export route for the steel industry in Ukraine.

BEAUBIEN: As difficult as it is to get steel from Zaporizhstal to Metinvest customers in Turkey, Italy and North Africa, the Zaporizhstal factory at least is still in Metinvest's hands. In Mariupol, Russian forces relentlessly bombed Metinvest's Azovstal iron works in order to capture it and finally take full control of Mariupol. While Azovstal is now better-known, it was actually the smaller of two steel plants owned by Metinvest in Mariupol. The other, the Ilyich Steel and Iron Works, spread over more ground and, with 14,000 employees, had more workers than Azovstal. It, too, was seized by Russian troops in April.

RYZHENKOV: At some point in time, we will come back to Mariupol and see what is the state of Azovstal and Ilyich mill and see if they can be restored.

BEAUBIEN: Earlier this year, Metinvest was paying its idled employees two thirds of their salaries, including at the Mariupol plants now controlled by the Russians. But in June, the company had to lay off thousands of workers. Ryzhenkov says the company right now is focused on survival. The challenges facing Metinvest are similar for other Ukrainian steel makers and industrial firms, particularly in the east of the country.

ANDREW LOHSEN: There are a number of really problematic trends that will compound over time.

BEAUBIEN: Andrew Lohsen, up until last year, was based in Ukraine as an analyst for the Organization for Security and Cooperation in Europe.

LOHSEN: One of them is the fact that these industries are highly dependent on coal that is mined in areas that are behind enemy lines now or in areas that are close to the fighting.

BEAUBIEN: Lohsen is now a fellow at the Center for Strategic and International Studies in Washington. He says the industrial capacity of Ukraine right now is severely strained because so much of its manufacturing sector is in or near the most active fighting in eastern Ukraine. He says the one potential silver lining for Ukrainian industry is that the Russian bombing campaigns mean that there are lots of roads, bridges and other infrastructure that need to be rebuilt. Jason Beaubien, NPR News.

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