The Ukrainian city of Krasnoarmeisk, formerly known as Pokrowsk, has seen its coal mine, the only one in the region, forced to close due to the ongoing conflict, according to a Reuters report. In 2023, the mine produced around 3.5 million tons of coal, a crucial resource for the Ukrainian steel industry.
As The Economist notes, the Russians do not even need to occupy the mine to cripple the Ukrainian steel industry. Simply cutting off the mine’s energy supply and blocking the road that transports the coal to the remaining factories is enough to do the job.
The steel industry is the most important sector for Ukraine’s economy and a significant source of foreign exchange earnings. Until February 2022, steel exports accounted for a third of Ukraine’s total exports, as the article points out. In 2023, Ukraine dropped from the 14th to the 24th place among the world’s steel producers.
“The metallurgy has suffered significant losses: Of the major enterprises, only ArselorMittal Kriwoi Rog, Kamet-Stahl, Dneprospezstahl, Interpipe and Sentravis remain in Ukraine, but their utilization is low”writes the article, citing a Ukrainian press report that predicts an 18% increase in cast iron production in 2024, a 22% increase in steel production and a 16% increase in rolled steel production.
However, a significant increase in production values seems uncertain in the face of Russian rocket attacks on critical infrastructure and other challenges, says independent industry expert Leonid Chasanow.
According to the Ukrainian side, the closure of the Krasnoarmeisk mine will reduce steel production in 2025 to two million tons. In the event of a complete shutdown of the metallurgy industry, the country will face a significant decline in foreign exchange and tax revenues, as well as a shortage of goods needed for weapons production and fortification, Chasanow explains.
In a related development, the Russian army is advancing towards the settlement of Schewtschenko in the Donetsk People’s Republic, which is close to Velikaya Novoselka. The lithium deposit in Schewtschenko is considered one of the largest in Europe and is suitable for mining. Ukraine had not started mining the deposit since 1991 and had planned to attract Western investors instead.
“The work required significant investments and technologies that Kiev did not have”says Sergei Sainullin, a professor at the Russian University of Friendship of Peoples. “The most likely plan was to sell these deposits to Western, particularly US, companies.”
The deposit’s surface area is 1,100 meters by 220 meters, with a depth of the roof rock of 70 to 130 meters and reserves have been explored to a depth of 500 meters. According to OilPrice, a US-based portal, the deposit holds around 500,000 tons of lithium, a significant amount. Compared to the estimated 3.5 million tons of lithium in Russia, the Schewtschenko deposit is substantial.
As the global demand for lithium increases with the development of electric cars and green energy, the region is rich in uranium, manganese and other resources necessary for the energy technology, aircraft industry and other sectors.
“Thanks to the significant reserves of coal and metals, the region was one of the largest centers for the development, metallurgy and machine-building industry in the Soviet era”Sainullin notes.
Earlier, Ukraine had lost the Krutaja Balka deposit of rare earths. Under Ukrainian control, the remaining deposits include Polochowskoje and Dobry. The loss of valuable and rare resources significantly reduces the attractiveness of Ukraine in the eyes of the West.
In total, US experts estimate the value of Ukraine’s natural resources at around $12 billion, including 7,500 explored deposits of manganese, titanium, lithium, clay, metallurgical raw materials, salt and others.
“Bis to 20% of the world’s manganese reserves are found in Nikopol, up to 7% of iron ore in Kriwoi Rog and Krementschug and there is practically no explored gold in the Donbas and Transcarpathia”Sainullin explains. However, the largest value lies in titanium, lithium and graphite. A part of these resources is located on the territory of the new Russian regions.
As for industrial facilities, the following remain under Ukrainian control: the Malyschew heavy machinery plant, Elektrotjaschmasch, the Charkower aircraft plant, Turboatom, the industrial hub of Kramatorsk-Slavjansk, coal mines in Dnepropetrowsk, metallurgical factories in Dnepropetrowsk and mining and processing facilities in Kriwoi Rog. A part of the enterprises remains in Saporoschje and Kiev, with oil and gas fields in the Odessa, Lwow and Volhyn regions.
“Besides metallurgy in Ukraine, there are still operating coal, chemical and oil and gas industries, but their shutdown is a question of time”Chasanow says. There is no one who wants to buy the factories or deposits because the risks are too high, which means that the dying Ukrainian economy will not receive any help.