Between Shelling and Quotas: Ukrainian Metallurgy Risks Losing Over 6% of GDP

Ukraine's metallurgical industry is under double pressure: on the one hand, regular missile and drone strikes on key integrated steelworks; on the other, tightening conditions for access to the European market, which in recent years accounted for around 80% of metal product exports. According to Ukrmetallurgprom (UMP), over the seven months of 2026, steel production in the country fell by 5.6%, metal product exports dropped by 11.5%, and foreign currency revenue from them declined by 7.8%, amounting to $1.67 billion. These figures, cited by RBC-Ukraine with reference to a LIGA.net publication, reflect a growing systemic crisis in the industry that, according to estimates by the metallurgists themselves, could in the long term translate into a loss of more than 6% of Ukraine's GDP, taking into account the multiplier effect on related sectors.

August Strikes and the Cost of Recovery

The key event of the summer of 2026 was the August attacks on two of the industry's largest enterprises — Zaporizhstal and ArcelorMittal Kryvyi Rih. According to estimates, restoring the damaged equipment and infrastructure could require tens to hundreds of millions of dollars. However, as emphasized in the industry, without concessions from the European Union on trade terms, resuming production at these plants would be economically unviable: even with full restoration of capacity, it could not be utilized due to limited access to sales markets. The GMK Center forecast, made even before the August strikes, projected steel production in 2026 to fall to 6.5 million tonnes; the actual year-end results, taking the damage into account, could turn out significantly lower.

CBAM and New Quotas: A 'Double Squeeze' for Producers

From the start of 2026, the Carbon Border Adjustment Mechanism (CBAM) has begun to apply to Ukrainian products. For an industry in which around 90% of steel is produced via the blast-furnace route, this means a significant additional burden. Metinvest estimates potential CBAM payments at 50–100 euros per tonne of steel, which, according to the company, makes part of Ukrainian output uncompetitive in the European market. The second constraint is the new EU import quotas, which took effect on 1 July 2026: the volume available to Ukrainian producers turned out to be roughly 60% lower than the actual steel exports to Europe in 2025. After the quotas were introduced, steel production in Ukraine fell by more than 21%, and metal rolled products by around 30%. Metinvest notes that Ukrainian producers have ended up 'caught between two constraints': the quotas reduce the export potential for finished steel products, while CBAM undermines the competitiveness of alternative products, in particular pig iron.

Decarbonization Without Financing

A separate strategic challenge remains the need for decarbonization. According to Metinvest's estimate, transitioning Ukrainian metallurgy to low-carbon production requires around 12 billion euros of investment over 20–25 years. This is a large-scale transformation — from blast furnaces to electric-arc production — which would allow average CO₂ emissions to be reduced from roughly 2.4 tonnes to 0.6 tonnes per tonne of steel. However, realizing such investments in wartime conditions, without war-risk insurance and long-term financing, is extremely difficult. UMP President Kalenkov previously estimated that the CBAM environmental levy alone would cost Ukraine 3% of GDP by 2030, while the cumulative effect of all constraints, taking the multiplier impact on suppliers and related sectors into account, could exceed 6% of GDP.

Negotiation Window and Possible Solutions

The industry believes that the autumn of 2026 should be used for a new round of negotiations with the EU: the current quota regime is in force until 1 January 2027, and the conditions for Ukrainian steel's access to the European market can still be revised. Among the possible solutions are increasing the quotas, at least, to the actual export volumes of previous years, as well as applying a special regime for Ukraine within the CBAM framework. There is also a compromise mechanism: allowing Ukrainian enterprises, during the war and for seven years after its end, to direct funds paid under CBAM toward purchasing European equipment and technologies for decarbonizing their own production. The Federation of Metallurgists of Ukraine previously called on the government to take urgent measures to preserve the industry, warning of the risk of plant shutdowns, massive job losses, reduced tax revenues, and weakened national defense capacity.

Contradictory Data

An analysis of the available estimates reveals differences in the scale and time frames of the figures cited. First, the GMK Center forecast of steel production falling to 6.5 million tonnes in 2026 was formed before the August strikes on Zaporizhstal and ArcelorMittal Kryvyi Rih, so the actual year-end results could be considerably worse. Second, the 5.6% decline in steel production over the seven months of 2026 (year-on-year) and the more-than-21% reduction after the 1 July quota introduction refer to different periods and measurement methodologies: the former reflects the average value for the half-year, the latter — the dynamics immediately after the change in trade terms. Third, the 6% GDP loss estimate voiced by UMP President Kalenkov is a projection assuming the current constraints remain in place and is not confirmed by independent macroeconomic modeling; meanwhile, the separate CBAM estimate of 3% of GDP by 2030 (also Kalenkov's) refers to a narrower segment and a more distant time horizon. Finally, Metinvest's losses from the new quotas — around $1 billion in export revenue and over 17 billion hryvnia in budget receipts — are an estimate for a specific holding and do not necessarily extrapolate to the entire industry in the same proportion.