Yuriy Ryzhenkov, CEO of the Ukrainian steel giant Metinvest Group, recently gave a candid interview to Corriere della Sera, shedding light on the myriad challenges his company faces amidst the ongoing conflict in Ukraine and the controversial decisions made by the European Union regarding sanctions on Russian steel. As the leader of a multinational corporation with an annual turnover exceeding $7 billion, Ryzhenkov's perspective offers a unique insight into the intricacies of managing a steelmaker in a war-torn country.
One of the primary challenges for Metinvest has been the skyrocketing cost of energy. Due to Russian military actions, Ukrainian power stations have been severely damaged, leading to significant energy supply shortages. As a result, Metinvest has been forced to import a substantial portion of its energy needs, with international transmission costs nearly doubling its energy bills. This issue is not just a Ukrainian concern; it also affects Italy, where Metinvest supplies steel to local mills. Once major suppliers from Mariupol’s Azovstal and Ilyich Steel plants, the company now primarily relies on its Zaporizhzhia facility to fulfill orders.
A more pressing concern for Italy, however, is the European Union's recent decision to relax sanctions against Russian steel imports. In October 2022, the EU had unanimously agreed to halt the import of Russian slabs by September 2024. However, this decision was quietly postponed until 2028, allowing an additional 10.7 million metric tons of Russian raw steel into the EU market. This steel, benefiting from Russia's lower energy costs, has a price advantage of approximately 15%, placing ethical producers like Metinvest at a significant disadvantage. As Ryzhenkov pointed out, this decision not only undermines Ukraine's economic resilience but also benefits the Russian economy, all while the Russian military continues its assault on Ukrainian infrastructure.
Ryzhenkov was particularly critical of the Italian industrialists who continue to purchase Russian slabs. He argued that these actions essentially finance Moscow’s military aggression, a position he finds both unethical and short-sighted. Italy's industrial sector, which includes the government-controlled Taranto plants recently reclaimed from ArcelorMittal, could instead benefit from sourcing steel locally or from ethical suppliers like Metinvest. However, as Ryzhenkov lamented, the allure of cheaper Russian steel has led to a situation where Italian producers operate below capacity, harming the domestic economy while supporting Russia’s war efforts.
The situation is further complicated by the status of Metinvest’s operations in Italy. Earlier this year, the company decided to temporarily halt production at its Verona plant, resulting in layoffs. Meanwhile, a nearby plant owned by Russia’s NLMK group continues to operate, importing raw materials from its parent company in Russia without interruption. Despite these setbacks, Ryzhenkov remains optimistic about Metinvest's future in Italy, particularly its investment in a ‘green’ steel project in Piombino. This ambitious initiative aims to link high-quality Ukrainian iron ore with Italian steel production, potentially transforming the metallurgy industries of both nations. Ryzhenkov expressed confidence in the project's progress, noting strong support from the Italian government and a hopeful outlook for its completion in the coming months.
The interview with Ryzhenkov highlights the complex and often contradictory dynamics at play within the European steel market. While ethical producers like Metinvest grapple with the economic fallout of war and rising production costs, the EU’s decision to ease sanctions on Russian steel exacerbates these challenges. For Italy, the situation is particularly fraught, as the pursuit of cheaper imports from Russia risks undermining both its industrial base and its ethical standing in the international community. As Metinvest continues to navigate these turbulent waters, its commitment to sustainable steel production in Italy may yet offer a path forward, provided the necessary political and economic support is forthcoming.
