EU considering removal of all trade barriers to Ukraine exports

To help boost war-ravaged Ukraine's exports to the EU, the European Commission proposed April 27 to suspend for one year its import duties on all Ukrainian exports to the bloc, it said on its website.

The proposal would also see the suspension for one year of all EU anti-dumping and safeguard measures in place on Ukrainian steel exports. It now needs to be considered and agreed by the European Parliament and the Council of the European Union.

"The EU has never before delivered such trade liberalisation measures, which are unprecedented in their scale: granting Ukraine zero tariff, zero quota access to the EU market," said Valdis Dombrovskis, EC executive vice-president and commissioner for trade.

EC President Ursula von der Leyen, in the same statement, said, "The step we are taking will greatly facilitate the export of Ukrainian industrial and agricultural goods to the EU."

Under the previously established procedure, in April-June Ukraine would be allowed to export to the EU a total 624,000 mt of rolled steel under product-specific quotas, including 257,000 mt (40%) of plate, with the second-largest allocation (113,000 mt or 18%) made for wire rod. Any volume on top of the quotas -- excluding semi-finished steel -- would incur import duties of 25%, but even using quotas was not fully duty-free, according Ukrmetallurgprom, an association representing Ukrainian steel producers.

On April 22, as reported by S&P Global Commodity Insights, Platts assessed Northern and Southern European plate prices at Eur1,800/mt ex-works Ruhr and Eur1,725/mt ex-works Italy, respectively.

Since the Russian invasion of Ukraine on Feb. 24, the Ukrainian economy and its trade with the world have suffered immensely, and the proposed measures could keep Ukraine's access to the world open, according to the EC. Once final approvals are enacted by the EU, Ukraine's exports to the bloc will be free from any quota and tariff restrictions.

To help to get Ukrainian products out into the world, the EC has already started easing the conditions for Ukrainian truck drivers and is facilitating the use of EU infrastructure to channel Ukrainian exports towards third countries.

"We asked of this [duties removal] a while ago, so we are glad the European Commission is going to suspend all duties for Ukraine," a source at the country's major steel producing company Metinvest told S&P Global.

"The problem is now how to get the materials [over the border]," he said. "[Shipping] form the ports is no longer possible," he said, referring to Russia's naval blockade in the Black Sea.

Logistics is a big issue

The majority, if not all, of Ukrainian exports are going to Constanta, a Romanian port on the Black Sea, according to another industry source.

"Mills transport by train to Izmail (a town on the Danube river in Ukraine's Odessa region), from there by barge along the Danube to Constanta, where the cargo is reloaded from the barge to the ship, but the Constanta port is small, and the queues for using it are huge," said the source. "And last night the bridge in Zatoka (a place in the Odessa region) was blown up, and we are trying to understand the consequences [to freighting], as it could affect access to Izmail.

"The transport communication with the port of Gdansk on the Baltic coast of Poland is still working poorly, you cannot do without a railway, but using one involves offloading cars (due to differences in railway track gauges in Ukraine and the rest of Europe)," said the source. "We are looking for other ways to deliver to Poland and stockpile there."

Ukraine is currently producing very little steel though. In January-March, as a consequence of the war, when almost all country's steelworks had to suspend operations in the last week of February, Ukraine's steel production declined by a third year on year with the sharpest drop occurred in March.

In Q1, Ukraine made 3.6 million mt of crude steel and 3.1 million mt of steel products, down 31% and 34% from the same quarter last year, respectively, Ukrmetallurgprom says on its website.

According to Metinvest, only three Ukrainian steel companies are currently operating: 49% Metinvest-owned Zaporizhstal, fully Metinvest-owned long rolled steel producer Kamet Steel and ArcelorMittal Kryvyi Rih.

Major Ukrainian pipe making company Interpipe has partially resumed operations too.

"We have restarted some finishing lines at our Dnepr, Nikopol and Novomoskovsk [all in Dnepropetrovsk region] sites to process semi-finished pipe and railway wheel blanks produced before the war," a spokesperson for Interpipe told S&P Global. The company is preparing to restart its electric arc furnace, but the date for that has yet to be fixed.

"Most of the output is meant for the EU with the first tonnage to go to Romania; small quantities are booked for other markets, but we have yet to start shipping them," she said. "The capacity of the available logistics pathways in Ukraine is limited. What we can sell today is by far smaller compared with pre-war turnover."

Major Ukrainian iron ore producer Ferrexpo told S&P Global April 27 that it is only sending products to European markets by rail and barge because Ukraine's Black Sea ports remain closed. Ferrexpo earlier in the month reported its January-March 2.7 million mt production of pellets was down 11% on the quarter, but stable on the year.

Ukraine in 2021 exported 44.4 million mt of iron ore products.