Poland needs to import 5 million tons of steel products per year for its own needs
Ukraine and Poland have always had extensive trade ties, including in steel products. Before the war, Ukraine held a large share of the Polish steel products market. Unfortunately, in 2022, Ukrainian steel exports accounted for only 12% of the total consumption of steel products in Poland. In Poland, the level of steel consumption has always been about 2.5 times higher than in Ukraine and therefore the Polish market has always been very important and attractive for Ukrainian producers and exporters.
Balance of mutual trade
Today, Ukraine is almost equal to Poland in terms of steel production, although before the war Ukraine produced 3 times more steel. According to WorldSteel, last year Polish companies reduced steel production by 13.1% year on year – to 6.4 million tonnes, while the decline in 2022 was 8.6% year on year – to 7.7 million tons. At this level of own production, domestic steel consumption in Poland in 2022 amounted to 13.3 million tons, a drop of 13.5% compared to the previous year. In other words, to cover its internal needs, Poland needs to import at least 5 million tons of steel products per year.
“Poland is one of the five largest importers of almost all types of long and flat products to the EU (wire rod, rebar, structural profiles, hot-rolled and cold-rolled sheets). The biggest imports are flat products: in 2022, Poland imported 6.3 million tons of these products, of which almost 1.3 million tons came from non-EU countries,” says Andriy Glushchenko, analyst at the GMK Center.
A large market and physically accessible logistics allowed Ukraine to increase the supply of steel products to the Polish market, even in conditions of war and a sharp reduction in its own production capacities. According to the State Customs Service of Ukraine, in 2023, Ukrainian steel exports to this country increased by 16% y/y in physical terms (up to 1.8 million tons), although in monetary terms they decreased by 18% y/y /a (to US$1.1 billion).
Unfortunately, compared to the pre-war period, exports of Ukrainian products to Poland have decreased – we export mainly raw materials and semi-finished products. Poland, on the other hand, managed to increase the supply of steel products to the Ukrainian market. In 2023, Polish companies increased steel exports to Ukraine by 62.7% in annual terms (to 112.7 thousand tons), in monetary terms – by 51.6% in annual terms (to $164 million), in 2023, 9.1% of Ukrainian steel imports came from Poland, but the growth potential of Polish exports is quite high.
Ukrainian iron and steel exports
Ukraine exports a full range of iron and steel products to Poland. The most popular export product is iron ore, the supply of which, although reduced since 2021, but in 2023 amounted to 3.3 million tons worth 346 million dollars.
In terms of key positions in Ukrainian exports of steel products, Ukraine managed to increase supply to the Polish market in the period 2021-2023:
- pig iron – increase of 17.4 times, to 633.3 thousand tons;
- hot-rolled sheets – drop of 38.3%, to 354 thousand tons;
- billet – increase of 2.2 times, to 260.5 thousand tons;
- ferroalloys – increase of 2.8 times, to 189.3 thousand tons;
- wire rod (carbon and alloy) – increase of 1.5 times, to 93.4 thousand tons;
- tubes – drop of 22.6%, to 69.4 thousand tons.
In some segments, Ukrainian suppliers managed to partially replace products previously supplied by Russia (before the imposition of sanctions and the start of hostilities).
After the start of the war, Ukraine drastically increased scrap exports to Poland – from 17,300 tons in 2021 to 160,600 tons last year. The specialized association UAVtormet believes that Ukraine will be able to export around 500 thousand tons of this material to Poland starting this year. This prospect of scrap outflow could create imbalance and deficit in the Ukrainian domestic market, which requires more and more scrap to restore production.
The increase in Ukrainian exports of steel semi-finished products to Poland is due to internal cooperation between ArcelorMittal facilities in different countries. The company's Polish division imports square billets produced by Ukrainian company ArcelorMittal Kryvyi Rih.
Details of Polish exports
The key positions of Polish exports of steel products to Ukraine in 2023 are:
- coated sheets (60 thousand tons),
- alloyed plates (11.7 thousand tons),
- shaped rolled sheet (11 thousand tons),
- hot rolled sheets (9.9 thousand tons),
- tubes (8.6 thousand tons).
«Imports of Polish steel products to Ukraine include the entire range of construction products – beams, angles, channels, rounds, profiles, welded tubes. To a much lesser extent, steel sheets from Poland are represented on the Ukrainian market, as Turkish imports prevail. But among Polish imports there may be steel products from other European countries, which local traders send to Ukraine from warehouses in Poland. This happens, for example, with steel products from Italy and Germany», says Vitaliy Prytula, responsible for the company Evrometal.
Between 2021 and 2023, before the war, Poland significantly increased the supply of these types of steel products to the Ukrainian market:
- ferroalloys – 34 times, up to 6 thousand tons;
- hot-rolled sheets – 11.7 times, up to 9.9 thousand tons;
- bonded rolled sheets – 3.2 times, up to 11.7 thousand tons;
- rails – 2 times, up to 2.7 thousand tons.
The volume of supplies of Polish steel products to Ukraine is still small. The most significant positions in the Ukrainian market are occupied by Polish polymer-coated rolled products. In 2022, supplies from ArcelorMittal Poland represented 43.7% (25.2 thousand tons) of imports of this product from the EU to Ukraine.
The supply of coke (code 2704) from Poland, which grew significantly at the end of last year, the company deactivated the coke battery at that facility. In pre-war 2021, Polish supplies of this product amounted to 76.4 thousand tons, worth 30 million dollars, but in 2023 they had grown to 266.3 thousand tons, worth 115 million dollars.
Poland competes on the Ukrainian market with other importers – both from Europe and Asian countries. Poland's main problem in increasing exports to Ukraine is the limited domestic production capacity, which is already decreasing. During the pandemic, ArcelorMittal Poland closed its blast furnace and steel production operations in Krakow and, since the end of last year, the coke battery at that facility has stopped working. In total, this largest Polish producer reduced steel production by 15% in 2022 compared to 2021 – to 3.4 million tons, still below the level of the pandemic year 2020 (3.9 million tons).
A spacious market is close by
There is a relative balance in mutual trade between Ukraine and Poland – offers in monetary terms are greater for one country or the other. But there is a specific feature: in natural terms, Poland exports much less to Ukraine, since its products have a higher added value. Thus, in 2023, Polish imports increased by 20% – to 4.6 million tons, in monetary terms – and 19%, to 6.6 billion dollars. In turn, Ukrainian exports last year decreased by 17% – to 11.6 million tons, in monetary terms – and 29%, to 4.8 billion dollars.
The decline in Ukrainian exports to Poland is due to the import ban on our agricultural products (in force since May 2023) and partly due to the blockade of border crossings by Polish transporters and farmers, which lasted from November 6, 2023 to January. 16 this year. According to some estimates, the Ukrainian economy lost more than 1.5 billion euros in November-December last year due to the blockade of western border crossing points.
Even the new Polish government, which is formally more favorable to Ukraine than the previous one, will not lift the ban on agricultural imports. Furthermore, Poland opposes the EU's extension of the preferential trade regime for Ukraine for another year (the current agreement is valid until June 2024). However, we hope that Poland will not be able to prevent the EU from making a collective decision with its vote.
In addition to commercial and political problems, there are a large number of logistical restrictions that reduce and complicate the volume of mutual trade between our countries. Ukraine's integration into the EU already requires large mutual investments in logistics infrastructure on both sides. A separate challenge is the harmonization of customs, licenses and other procedures. Practically 2 years of war showed us that if there is good will and the desire to increase the capacity of logistical routes, it is possible to achieve this objective despite different paths and procedures.
The likely prolonged abolition of import duties and tariff quotas on Ukrainian exports, the growth of the Polish economy (4.9% in 2022) and logistical accessibility create good conditions for increasing the presence of Ukrainian steel products on the Polish market. Poland has banned imports of Ukrainian agricultural products, but there is no such negative attitude towards our steel products. Today, for Ukraine, Poland is not only a transit country for our exports and imports, but also a very wide market for the sale of iron and steel products. On the other hand, Ukrainian recovery programs are of interest to large and medium-sized Polish producers and traders of steel products.
