Ukraine’s steel industry at stake by trade access to EU
I spent last week in eastern Ukraine, on a study visit to the steel industry in Dnipro, Kryvyi Rih and Kamijanske, in the Dnipropetrovsk region.
While Russia launches targeted attacks on Ukraine’s steel industry to cut off a financial lifeline, the EU must not punish this backbone of Ukraine’s economy with tariffs.
It’s a fact that the steel industry is a strategic target for Russian aggression. At this very moment, the EU must encourage, not punish this strategic sector of the Ukrainian economy. The survival of the industry depends on the access to trade with the EU.
Ukraine’s steel industry is not operating like it used to. Several production facilities are located in occupied areas not operating, or have been completely destroyed. Since the full scale invasion the production in the remaining facilities faces higher costs, by several causes.
- Reparation or replacement of destroyed facilities, transport trains and railways (specific targets for Russian attacks).
- Workers killed by Russian attacks on workplaces, as well as workers absent in Ukrainian armed forces.
- Energy costs at an all time high, with prices more than twice as high compared to the EU.
- High costs for CBAM, without access to certification for emissions under default value.
- Restricted access to financing for investments
The fact that the industry, against all odds, manages to keep operations going under these circumstances must be encouraged, not punished.
A collapse of the Ukrainian steel industry would have immense consequences to the country’s ability to defend itself and would be very harmful for the future reconstruction after the war. The social consequences for unemployment and financial resources for the region is alarming. Keeping these industrial cities, where people live and work on the border of the frontline, alive is a part of Ukraine’s defence and resilience.
On Monday the European Parliament will debate the new steel measure addressing the global overcapacity of the steel market, ahead of the plenary vote, which will take place on Tuesday.
As the rapporteur for the European parliament on this file I have worked hard to make sure that Ukraine as a candidate country and with its special security situation will be taken into account when allocating country quotas. Unfortunately this seems to not be the case.
This weekend, the Financial Times reported on the ongoing negotiations regarding the new quotas. According to information FT has obtained, the negotiation offer currently on the table appears to fall far below the volumes of steel that Ukraine exports today under the EU’s duty-free steel trade arrangements. In our view, this does not reflect the wording of the agreement stating that special consideration should be given to Ukraine’s situation. Before the vote, it will be my number one priority to ensure that the EU’s new measures against overcapacity in the steel market do not become a death blow to Ukrainian steel production.
Under the current safeguard Ukraine has an exception. In the new trade measures Ukraine’s situation as a candidate country with its special security concerns shall be considered when allocating country quotas. Before the vote on Tuesday, the Commission has to clarify on this and guarantee that the legislation will be implemented in a way that reflects that.
When the new steel trade measure replaces the current safeguard on 1st of July, it is crucial to keep the free trade with Ukraine open. To this day, trade with the EU serves as an economic lifeline for Ukraine, and that needs to continue as part of the overall support for Ukrainian resilience in their defence of Europe.
Ukraine must be treated as a future member and strategic partner to the EU, not as a threat.