Why green steel should play a vital role in Ukraine's post-war recovery

Rebuilding Ukraine’s ravaged steel sector—which produced 22 megatonnes (Mt) annually prior to the war—presents a golden opportunity to harness the striking economic benefits of low-emission steel production once hostilities cease.

A roadmap for rebuilding Ukraine’s steel sector to be close to zero emissions by 2050 has already been drawn. The industrial decarbonization pathways assume Ukraine’s eventual accession to the European Union. This makes Ukraine’s steel decarbonisation non-negotiable. Ukrainian steel-makers would be subject to the EU Green Deal target for near zero-emission steel (also known as green steel) by 2030 and open access to essential green export markets.

A robust green steel sector in Ukraine would have ripple effects across the entire economy, for instance, through stronger supply chain links. In 2021, for every $1 invested in Ukraine’s basic metals industry, an additional $3.28 was generated elsewhere in the economy. In our new paper, Techno-economic Optimisation of Steel Supply Chains in the Clean Energy Transition: A Case Study of Post-war Ukraine, we quantify for the first time that by 2050, a green steel pathway would generate up to $415 billion of gross value added (GVA) and $164 billion worth of additional GVA compared to traditional coal-based steel-making.

Replacing coal as the primary heating source in steel furnaces with renewable energy will radically shift the centre of gravity of Ukraine’s steel industry from eastern regions towards western and southern ones and accelerate economic growth. The proposed new green steel mills will be situated near (i) westward cross-border railway crossings and southbound Black Sea ports and (ii) optimal solar and wind energy sources.

This will substantially increase demand for land and sea transport services, re-routing them towards Western/EU markets, but also create new demand for the production of green hydrogen (H2) and green ammonia (NH3) as decarbonized fuel and for higher-grade iron ore and metal scarp inputs into steel-making itself. Green steel will also generate new demand for specific ferroalloys, chemicals and non-metallic minerals (e.g. graphite electrodes) used as intermediate inputs.

Ukraine would require an investment of $62 billion over 20 years to fully recover steel production. This capital injection would cover $45.9 billion for renewable energy infrastructure, $6.6 billion for energy storage, and $9.5 billion for iron and steel-making furnaces, in addition to funds to recover and upgrade the supporting transportation systems.

The most recent analysis by the World Bank of Ukraine’s post-war recovery and reconstruction needs estimates them at $486 billion. Thus, by comparison, Ukraine’s green steel investment needs amount to 6% of the country’s total post-war reconstruction needs over the first 10-year period. As a positive step forward, a recent commitment by domestic players (including the largest Ukrainian steel-makers Metinvest and ArcelorMittal) of $35 billion into the medium-term green steel transition strategy until 2035 means the outstanding amount needed would be significantly lower.

Access to capital, clear climate policies, and strong regional trade links will also be integral to the successful redevelopment of Ukraine’s iron and steel sector.

The country was previously the 14th largest global steel producer, with 21.4 Mt crude steel output in 2021. But its pre-war steel industry was also one of the dirtiest in the world. In 2020, the Ukrainian steel industry was responsible for 48 Mt CO2, 15% of the country’s entire carbon dioxide emissions. Globally, steel-making produces more CO2 than any other manufacturing and construction industry, comprising around 8% of total global emissions – 2.6 gigatonnes of CO2 per year, around eight times more than international aviation.

However, our research shows Ukraine could provide the ideal blueprint for a near-zero emissions steel industry. The country has the clear potential to develop the clean energy infrastructure needed – including a robust supply of renewable energy and green hydrogen produced using renewable energy. Ukraine also sits on vast reserves of iron ore, the main raw material needed to make steel using virgin materials and is well located for access to European customers.

The vast destruction of Ukraine's iron and steel-making assets represents a stark opportunity to rebuild a thriving industrial sector independent of fossil fuels. Ukraine is well positioned to supply European green steel markets, providing employment throughout the value chain and delivering returns to the economy well beyond the original investments.

This research is not just another feasibility study. It is a call to action for steelmakers, investors, and politicians to ensure that we rebuild better after the war.

Investing in a Ukrainian green steel-driven recovery would not be charity. Green steel would become a sustainable growth promotion machine for Ukraine’s post-war development, generating almost twice as much economic growth as traditional coal-based steel. This means more income and higher living standards for all Ukrainians.