The Ukrainian iron ore industry is entering 2026 under sustained strain, as a combination of weak global prices, sharply rising energy costs and new EU carbon regulations continues to erode competitiveness and disrupt production.
Ukraine’s iron ore sector recorded a 3.4% decline in production and a 3.3% drop in exports, reflecting already weakening fundamentals. The downturn has accelerated in early 2026, with iron ore exports plunging by 33.9% year-on-year in the first quarter. The sharp contraction highlights the growing fragility of a sector heavily exposed to global commodity cycles and domestic infrastructure constraints.
Persistent Price Weakness Undermines Profitability
A key structural challenge remains the prolonged decline in global iron ore prices, which has persisted since 2021.
- Average price in 2025: $102/t
- Forecast for 2026: approximately $97/t
This sustained price pressure is squeezing margins across the industry. Combined with rising input costs, it is significantly limiting the ability of producers to fund modernisation and capacity upgrades.
Energy Costs Become a Critical Pressure Point
Energy remains one of the most decisive cost factors in iron ore production, accounting for up to 60% of total concentrate production costs.
Electricity prices have surged dramatically:
- January 2024: around $89/MWh
- March 2026: above $160/MWh
This sharp increase has severely weakened the cost competitiveness of Ukrainian producers compared with major global exporters such as Brazil and Australia, where energy costs are more stable and production scales are larger.
Internal demand is also deteriorating. Crude steel production in Ukraine fell by 2.2%, reducing domestic consumption of iron ore and increasing reliance on export markets at a time when global prices are already under pressure. This imbalance is further exposing producers to external volatility.
CBAM Adds a New Layer of Competitive Pressure
The introduction of the EU’s Carbon Border Adjustment Mechanism (CBAM) is emerging as another structural challenge for Ukraine’s steel and mining value chain.
CBAM is already influencing trade flows, with Ukrainian steel producers facing reduced competitiveness due to high default emission benchmarks embedded in the regulation. While the mechanism is targeted at steel products, its impact is cascading upstream, placing additional pressure on iron ore demand and pricing dynamics.
Ferrexpo Highlights Sector Strain
According to data reported by GMK Center, Ferrexpo, a major Ukrainian iron ore producer listed on the London Stock Exchange, has experienced a significant operational downturn.
In Q1 2026:
- Total production fell 72% year-on-year to 592,750 tonnes
- Pellet output declined 52% year-on-year to 523,000 tonnes
The company attributed the sharp decline primarily to damage to Ukraine’s energy infrastructure caused by Russian attacks, which disrupted electricity supply and forced a temporary suspension of operations until the end of February.
