Ukraine’s scrap export duty: protecting mills or punishing collectors?

Ukraine’s wartime restrictions on scrap exports were written to protect steel mills. They have also, predictably, cut the income of the people who gather the metal. The Ukrainian case is a small, sharp version of a question every scrap-producing country faces in a crisis, and the answer here is the standard one: what protects the mill starves the collector.

The mechanism is a wartime export duty and an accompanying set of permissions on ferrous scrap, used alongside the broader state controls that govern any critical input in a war economy. The intent was straightforward. Ukrainian steelmaking capacity has been damaged and disrupted by the war, mills have lost their blast furnace base in the occupied east, and anything that keeps domestic furnaces fed is treated as part of the war effort. Scrap is one of the few inputs Ukraine still has in reasonable quantity domestically, and restricting its export is a cheap way to keep it inside the country.

The problem, as always, is the second-order effect. Ukraine’s scrap collection chain is substantially informal, and it was already weakened by population displacement and by the danger of working in the affected regions. When the export channel closes, the domestic price the collectors receive falls, because the mills become the only game in town. That is not a guess: it is the same mechanism that other export restrictions, most visibly Russia’s, produced under less extreme conditions. Comtrade’s pre-war data shows the size of the export trade the country had built; the wartime data simply stops showing much of it.

Why now? Ukraine’s reconstruction planning has begun to discuss the mining and metals sector’s recovery, which makes the scrap question live again. A rebuilding country will need both: mills running at capacity and a collection workforce that has not been economically destroyed. The current arrangement supports the first and quietly undermines the second, and at some point the reconstruction plans will need the collectors more than the mills need protected feedstock.

What should happen is a targeted softening rather than repeal. Full repeal in wartime is not remotely realistic, and the mills’ argument is genuine. But a duty that simply transfers income from collectors to mills could at least be paired with payment support for the collection workforce, or with a floor price at the point of sale. International donors, who are already funding reconstruction planning, could make collection-chain viability part of it rather than treating scrap as a footnote to industrial policy. The evidence from other countries is clear that a one-sided restriction leaves a smaller, weaker collection sector behind it, and the country will need that sector for decades.

The steel sector’s losses also reshape where scrap is even available. Before the war, Ukraine’s integrated mills sat in the east, close to the ore and the power, and the scrap collection system ran in a wide orbit around them. The mills that still operate are further west and south, and the collection geography has to follow them. Transport inside a war zone, or near one, adds costs that neither the collector nor the mill can absorb for long, and some of the collection infrastructure has been damaged or dispersed along with everything else. None of that shows up in a duty rate, and all of it changes what the policy actually delivers.

The reconstruction arithmetic is worth stating plainly. Every bridge, railway and building that Ukraine rebuilds will need steel, and the cheapest way to make that steel in a country with damaged ore supply is with scrap and electric furnaces. So the collection chain that the current policy underpays is the same chain the reconstruction will need, working at full capacity, within a decade. Countries that have paid their collectors through the hard years have kept the chain intact, and countries that have not have spent the recovery rebuilding it at far greater cost. Ukraine is going to be the largest test case of that choice the region has seen.

The financial channels are the other constraint. Ukrainian trade finance has been disrupted since the war’s first days, and a scrap trade that runs on letters of credit needs the banking system to function before it can move anything. Some of that capacity has returned for agricultural trade, which is treated as a hard currency earner, and there are occasional voices in the metals discussion asking for the same treatment. This is a modest policy lever that supports the collecting economy too, because export channels are what set the ceiling on domestic prices, and closing them is what pushed those prices down in the first place.

The railway network’s condition sits underneath all of it. Moving scrap from collection regions to functioning mills means rail, and the country’s rail infrastructure has been under direct attack, with knock-on costs and delays that nothing in the duty schedule accounts for. A policy written on paper assumes that material can travel from where it is gathered to where it is needed. In the current Ukraine, that assumption cannot be made, and the collection sector effectively carries the freight risk that the policy refuses to acknowledge.

For traders, the Ukrainian market is not currently a practical one for most, and the honest advice is to watch the reconstruction phase rather than plan on the present. The lesson is in the pattern: restrictions written for mills under pressure are the world’s most reproduced scrap policy, and they behave the same way everywhere. UN Comtrade holds what remains of the trade record, and the OECD’s work on export restrictions documents the wider policy drift. While flows stay restricted, the trade that does continue happens through documented channels, which is exactly what scrap.trade exists to make simpler.