Ukraine's steelmakers fret as Russians advance towards key coal mine
Coking coal mine is vital for Ukraine's steel industry
Metal exports raised almost $2 bln in January-August 2024
US, South African coking coal imports would push up costs
By Pavel Polityuk
KYIV, Oct 16 (Reuters) -As Russian forces grind their way towards the strategic supply hub of Pokrovsk in eastern Ukraine, they are also approaching a coking coal mine that fires the country's vital steel industry.
Russian troops have moved to within around 12 km of Pokrovsk, overwhelming Ukraine's stretched defences with vastly superior numbers and equipment. Thousands of residents have fled and key road and rail links to other cities risk being severed.
Around 10 km west of the town centre lies a mine that produces a special type of coal needed to produce coke, an essential element in steelmaking - which is second only to agriculture in earning hard currency for Ukraine.
Metal exports were worth almost $2 billion in the first eight months of this year, according to trade data, money needed to keep Ukraine going two and a half years into Russia's full-scale invasion.
Oleksandr Kalenkov, head of Ukraine's steelmakers' association, said the loss of the Pokrovsk mine, the only domestic source of coking coal, could cause steel production to slump.
"We could make up to 7.5 million metric tons of steel by the end of the year and, for next year, we saw an increase in production to over 10 million," Kalenkov told Reuters.
"But if we lose Pokrovsk, then ... we will fall to 2-3 million tons."
The dire warning is a reminder of how Russia's invasion is targeting Ukraine's economy, posing an existential as well as a territorial threat.
The head of the Ukrkoks coke association, Anatoliy Starovoit, said Ukraine produced about 3.5 million tons of coke in 2023 and used coking coal mined exclusively in Pokrovsk.
"We don't know where to get coal if Pokrovsk is seized," he told Reuters. "It is difficult to bring it in by importing; today it is not so easy to bring it in by sea."
IMPORT, EXPORT
Ukraine has several deep-water ports on the Black Sea, but steelmakers would find it difficult to import significant volumes of coal because of military risks and because ports are built for exports rather than imports.
To do so would also push up production costs for steelmakers, Kalenkov said.
"There will be imports, of course, but there won't be enough imports."
The most likely alternative sources of supply are the United States and African countries including South Africa, he added.
Some producers have been stockpiling as a precaution against possible supply disruptions.
"We have replaced the deficit in the local market for coal with imported raw materials, but we maintain high reserves," ArcelorMittal Kryvyi Rih, Ukraine's largest steelmaker, said in a statement. The company is part of ArcelorMittal S.A. MT.LU, a Luxembourg-based multinational steel manufacturing corporation.
A steel industry source said producers hoped to find alternative sources of coke coal from elsewhere in Ukraine should the Pokrovsk mines be occupied, but that imports would inevitably be needed and increase production costs, making steel less competitive.
Ukraine produced more than 4.3 million tons of rolled steel products in January-August 2024, of which 66% were exported. EU countries accounted for 72% of the volume exported, according to the steelmakers' union.
Additional reporting by Libby George; Editing by Mike Collett-White and Philippa Fletcher
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