The price of uncertainty: why Ukrainian steel products are losing markets in the EU
2 March 20:05
At the end of February, it became known that ArcelorMittal Kryvyi Rih intended to close its subsidiary, the Foundry and Mechanical Plant. In January, it was reported that the company planned to close its blooming mill. Komersant investigated why Ukraine’s largest metallurgical plant was forced to do this.
ArcelorMittal Kryvyi Rih’s production activities have recently come under pressure from at least three factors, according to the company.
First, the introduction of the CCI (carbon import adjustment mechanism), which will be transformed from quarterly reporting into a real carbon tax on January 1, 2026, has had a negative impact.
As a result, a significant portion of the plant’s steel products are at risk of losing the EU market. Extremely high electricity prices in Ukraine are also contributing to the unfavorable situation. In addition, this winter, the country’s energy and other infrastructure suffered particularly severe damage due to hostile attacks. All this has had a negative impact on the company’s production and financial performance and has brought to the agenda the issue of shutting down both the Foundry and Mechanical Plant and the blooming shop, which, incidentally, was geared towards exports to the EU.
Barrier SBA
In fact, throughout the past year, Ukrainian metallurgists, and not only them, have been waiting for a decision from the European Commission that would protect Ukrainian enterprises operating in the particularly difficult conditions of war from the consequences of the introduction of the SVA. The European Commission had the opportunity to do so. But in December 2025, Brussels refused to grant Ukrainian steel producers any exemptions or a transition period, despite the ongoing full-scale war. European officials were guided by the assumption that the impact of the SBA on Ukraine would be minimal. Unlike them, manufacturers cannot afford to be guided by assumptions — they need certainty. And for Ukrainian manufacturers, it is not at all attractive.
Oleg Krykavsky, director of government relations at ArcelorMittal Kryvyi Rih, explains .
“There is enormous uncertainty surrounding CBAM, which stems from the fact that there is no officially established tariff for Ukraine for specific products. There is no official document, except for a certain formula that everyone calculates independently. The Ukrainian government claims in verbal communications that the European Commission believes that CBAM for Ukraine will be €2-3 per ton of product in 2026. Minus €0.6 is 30 hryvnia per ton, which we pay in the form of CO2 tax in Ukraine. That is, essentially, €2-3 minus €0.6. These are very low figures and do not indicate any catastrophic situation. But we calculate the same formula as our market colleagues at Metinvest, and we do not see such wonderful figures — 2-3 euros. We see 60-90 dollars per ton of product, minus 0.6 euros, which we pay for CO2 here in Ukraine. Thus, no one understands what the CBAM rate is, because there is no official document or explanation. This will become known in 2027, when importers of products into the EU start paying,” the expert notes.
He explains that technically, the importer pays for CBAM in the European Union. That is, in essence, the counterparties, partners of the Ukrainian company.
At the same time, CBAM accrual begins on January 1, and the counterparty-importer will pay in 2027 a one-time fee for the entire 2026 year during which it imported. Ukrainian partners, on the other hand, do not have such privileges. Oleg Krykavsky, Director of Government Relations at ArcelorMittal Kryvyi Rih, continues.
“The situation is as follows: if we want to export our products to the EU, we must provide the importer of these products, i.e., our counterparty in the EU, with the maximum discount on the maximum calculated CBAM. That is, even if the European Commission has calculated that it will be €2-3, and we calculate that it will be $60-90 per ton, we must provide a discount of $60-90 per ton in order to sell in 2026. This is because the importer must include this amount in order to be interested in importing our products into the EU. In fact, they are not interested in this: they do not want to deal with CBAM or any reports, and in essence, they are gradually switching to European products that are free from this headache — Polish and German products. In essence, importers are not interested in continuing to work with us,” the expert notes.
And this lack of interest has already become apparent. According to Oleg Krykavsky, given that there has been some uncertainty about the CBAM rate since last year, the company has had no new orders for product deliveries to the EU since October 2025.
Critical prices
Record electricity prices for Ukrainian enterprises significantly increase the cost of production and, accordingly, increasingly worsen the economic feasibility of production — in the case of ArcelorMittal Kryvyi Rih — steel products. Recently, this price impact has become particularly critical, as damage to energy infrastructure caused by heavy Russian shelling has forced the company to purchase imported electricity, which is even more expensive, with a markup from traders.
Vladimir Gaidash, Director of Corporate Communications at ArcelorMittal Kryvyi Rih, continues.
“In February, the average price of electricity was $230 per megawatt, and at peak times it was $370 per megawatt. Meanwhile, our break-even point is $70 at the plant. That is, compare $70 with $230, and sometimes $360-370, which we pay,” the expert notes.
Oleg Krykavsky, director of government relations at ArcelorMittal Kryvyi Rih, suggests comparing this price situation with the conditions on the European market, where the company exports its products.
“There, the break-even point is the price of electricity at 50 euros per megawatt. This is what German industry is demanding from its government. And the German government has such a program; it will stabilize the price of electricity and lower it to 50 euros per megawatt. Now, as far as I remember, it is between €80 and €100 per megawatt. Compare this with our prices, plus the situation with CBAM, where we are forced to give a discount of $60-90 per ton that we have to import, and you can understand that our products are not competitive on the European market, and the price of electricity is not competitive, and we do not have the compensatory mechanisms and protection that European manufacturers have,” says Oleg Krykavsky.
He also explains how this situation could threaten Ukrainian industry.
“We will gradually transform from a metallurgical country into a country of mining and processing plants, because ore mining continues to be profitable. It is not covered by CBAM, it requires less electricity, and the steel industry is dying out, workshop by workshop. Partly because of the destruction caused by Russian aggression, partly because of electricity prices and CBAM, but the steel industry is dying out,” the expert notes.
However, the company does not agree with this development. In search of certainty regarding CBAM and hoping for more favorable scenarios for Ukraine, representatives of metallurgical companies continue to communicate with both the Ukrainian government and the European Commission — in Brussels and with the European Commission’s representative office in Kyiv.
ArcelorMittal Kryvyi Rih is also implementing several strategies to mitigate existing energy constraints. Oleg Krykavsky, the company’s director of government relations, spoke about these strategies during a recent online event entitled “How does the shelling of the energy system affect business operations?” held by the Center for Economic Strategy.
For example, work is underway to develop the company’s own power generation and cogeneration facilities based on existing thermal power plants. However, as the official notes, due to the scale of the enterprise, the implementation of such projects requires significant capital investments and a long time frame — for example, it is impossible to deploy 250 MW of own capacity in a short period of time. The company is also negotiating with the government to switch to long-term contracts for the purchase of electricity from producers. At the very least, this could mitigate price shocks.
Author: Serhiy Vasilevich
