A Vision for Green Steel: Metinvest’s Strategies in a Tumultuous Global Economy
In an extensive interview with Forbes Ukraine, Yuriy Ryzhenkov, the CEO of Metinvest Group, shared his views on the group’s performance in 2024, challenges from the war, and future investment strategies. Metinvest, one of Ukraine's largest steel producers, has continued to demonstrate resilience despite the ongoing conflict. Ryzhenkov spoke candidly about the difficulties faced, the impact of international politics, and the company’s ongoing push to become a leader in green steel production.
Ryzhenkov explained how Metinvest's leadership has played a pivotal role in guiding the company through a volatile global landscape, including political shifts, international economic turbulence, and the ongoing war in Ukraine. With a long-term focus on sustainability, decarbonization, and modernization, Metinvest is positioning itself as a significant player in the future of green steel.
Key Factors Influencing Metinvest’s Performance in 2024
Ryzhenkov identified several critical factors that shaped the company’s success in 2024. These elements not only bolstered the company’s growth but also highlighted its adaptability and ability to navigate a rapidly changing market.
1. Opening of Sea Corridor from Odesa Ports:
One of the most important developments for Metinvest in 2024 was the opening of a sea corridor from the Odesa ports, which was a direct result of the military blockade being lifted in the region. This move allowed Metinvest to restore vital logistical links, providing alternative routes for the transport of its products, particularly iron ore. This was a game-changer for the company, allowing it to significantly increase its exports, particularly to the European Union and Southeast Asia.
In fact, this logistical breakthrough was the primary factor contributing to the growth in exports, over 12 million metric tons of iron ore were exported, showcasing an overall increase in both physical volume and value.
2. Operational Efficiency Program:
Metinvest successfully ramped up its operational efficiency in 2024, a factor that has had a huge impact on its cost management and ability to weather global market fluctuations. The company re-implemented its operational efficiency programs, which included optimizing production processes, improving the utilization of raw materials, and focusing on cost reduction across the board.
This initiative not only helped reduce operational costs, but it also enabled Metinvest to bounce back from the price drop in steel and iron ore during the year. By refocusing on raw material sourcing, the company mitigated some of the impacts of declining prices in the market and achieved stronger operational performance.
3. Increased Export Volumes:
Metinvest saw a notable increase in export revenues outside Ukraine, particularly in the first half of 2024. Despite a challenging pricing environment, revenues grew by 25% year-on-year, driven largely by higher export volumes. The company significantly boosted its production of iron ore (+42%), pig iron (+3%), and steel (+4%), proving its capacity to grow even amid difficult global conditions.
Logistical advancements and improved international market access were major contributors to this success.
Challenges and Setbacks
However, Metinvest was not without its share of obstacles. Despite strong operational results, several challenges impacted the company’s performance and growth strategy.
1. Power Outages and Electricity Issues:
Ukraine’s ongoing war has disrupted energy infrastructure, and Metinvest was no exception. Power outages and difficulties in securing electricity imports created production halts and increased operational costs. Electricity transmission tariffs also became a significant financial burden for the company, further increasing production expenses. In light of these energy disruptions, Metinvest took measures to reduce its energy dependency, increasing its own energy production capacity.
2. Logistical Problems:
The challenges with rail transportation continued to affect Metinvest’s ability to transport materials at reasonable costs. The unprofitable tariffs for passenger transport, coupled with the non-market conditions for industrial freight, created a scenario where industrial transport costs rose significantly.
The situation was exacerbated by the military conflict, which disrupted supply chains, requiring Metinvest to pivot to global coal sourcing, a decision that resulted in significantly higher transportation costs, impacting the overall cost structure.
3. Impact of War on Staff and Operations:
The ongoing war in Ukraine has not only affected the physical infrastructure but has also led to a significant outflow of personnel from the affected regions. As Metinvest’s enterprises are located in areas near the front line, many employees relocated for safety. In addition, over 20% of Metinvest’s workforce, including more than 30% of those liable for military service, was mobilized into the Armed Forces. This disruption to the workforce caused further strain on operations, creating challenges in terms of productivity and production capacity.
Ryzhenkov highlighted the importance of deferrals for critical employees, arguing that these are essential for preserving the economic backbone of Ukraine during wartime.
Global Economic Outlook and the Trump Factor
Ryzhenkov was cautious about the impact of Donald Trump’s economic policies on the global economy, noting that the US's shift towards protectionism could have both immediate and long-term consequences. He argued that such economic moves would be harmful in the short run, and the US would begin to feel the repercussions of its decisions in the coming years.
Metinvest’s exposure to the US market is limited; its main exports are pig iron, a material not subject to tariffs, which reduces risks to its business. However, global protectionism could have wider ramifications for the steel industry, with steel tariffs potentially impacting global competitiveness.
Export and Investment Strategy Amid War
Metinvest’s export strategy has remained relatively stable despite the challenges of the war. The company focuses on its core markets, namely the EU and Ukraine, and continues to build out alternative markets where possible. Specifically, it has focused on expanding exports of high-iron-content iron ore, which has become an increasingly important commodity globally.
1. Challenges and Strategic Adjustments:
Metinvest is working hard to maintain access to international markets, particularly EU, US, and UK markets. In the context of these strategic relationships, the company is advocating for trade liberalization and supporting sanctions on Russia’s mining and metallurgical industries, which could otherwise distort the market and reduce Metinvest's market share.
2. Green Steel Transition:
In line with its green steel vision, Metinvest has also been working on reducing its environmental impact and transitioning toward sustainable practices. The company’s efforts in green metallurgy are demonstrated by its planned EUR 2.5 billion green steel plant in Italy, which will serve as a model for future green steel operations, including projects at its Ukrainian plants.
Energy Independence and New Investments
Metinvest is moving toward energy independence by expanding its generation capacity. It already produces 45-50 MW of its own energy, covering around 10% of its energy needs. In addition, the company is planning to expand its gas-fired power generation capacity by 40 MW and is also installing solar panels to increase its use of renewable energy sources.
M&A Plans and Investment Strategy
Looking to the future, Metinvest is keen on expanding its footprint globally, particularly in Eastern and Southern Europe. Ryzhenkov mentioned that Metinvest is currently evaluating M&A opportunities, including potential bids for plants like the Huta Częstochowa plant in Poland.
Metinvest also plans to continue investing in Ukraine once the security situation stabilizes, with a US$8 billion strategy for the green modernization of Ukrainian enterprises over the next 7-10 years. These efforts will be crucial for post-war recovery in Ukraine’s industrial sector.
Personal and Corporate Vision for 2025
Ryzhenkov’s personal and corporate goal is to position Metinvest as a global leader in green steel production by 2025. Despite the ongoing war, he believes that with strategic investments, a focus on sustainability, and support from both international partners and local industries, Metinvest will be able to fully capitalize on its vision and significantly contribute to Ukraine’s economic recovery.
Key Takeaways:
• Export Growth: Metinvest’s exports, particularly in iron ore, saw a 42% increase in 2024, boosted by logistical improvements, including the opening of a sea corridor from Odesa ports.
• Production Gains: Metinvest increased production across key products: iron ore (+42%), pig iron (+3%), and steel (+4%).
• Challenges: Key challenges included power outages, rising tariffs on services, and workforce shortages due to the war.
• Economic Outlook: Ryzhenkov expressed concerns about the impact of global protectionism and Trump’s economic policies on the global economy, but noted Metinvest’s limited exposure to US markets.
• Green Steel Focus: Metinvest is investing in green steel production, with a major project underway in Italy to develop a EUR 2.5 billion green steel plant.
• M&A Strategy: The company is considering potential mergers and acquisitions in Eastern and Southern Europe, particularly in Poland, to strengthen its business portfolio.
• Energy Independence: Metinvest is building additional gas-fired generation capacity and installing solar panels to become more energy self-sufficient.
• Investment in Ukraine: Despite the war, Metinvest invested USD 670 million in 2024, focusing on modernization and upgrading production facilities.
• Workforce Challenges: Over 20% of Metinvest’s workforce has been mobilized for military service, causing workforce shortages and the need for strategic deferral systems to preserve the company’s operational capacity.
• Long-Term Goals: Metinvest’s ultimate goal is to become a global leader in green steel production, with a focus on sustainability and carbon footprint reduction.
