Ukraine may soon lose its only coking coal mine. Due to the offensive of Russian troops on Pokrovsk, Donetsk region, the Pokrovske mine management, which provides the country's largest metallurgical enterprises with strategic raw materials, is under threat. The loss of this enterprise may force Ukraine to completely switch to imports, which will lead to a significant increase in the price of metal products.

Ukrainian Energy learned what Ukraine lost due to the actions of the Russian Federation and the occupation of a significant part of Donbas.

Metallurgists sound the alarm

The Pokrovske mine management has been operating in Ukraine since 1990 and is currently the largest coking coal mining enterprise. The mine's reserves reach 200 million tons. Last year, 5.5 million tons were mined, although in 2013 this figure was over 23 million tons.

The mine management is part of Rinat Akhmetov's Metinvest group.

Currently, the advance of the Russian army threatens two large coal mines - near the villages of Dobropillya and Udachne. The mines still produce coking coal, which is used in steel production. In particular, the main consumers of coal are the country's largest steelworks ArcelorMittal Kryvyi Rih and the Dnipro Metallurgical Plant (DMZ).

Despite the war, the metallurgical industry is trying to improve its situation. According to the Ukrmetallurgprom Association of Enterprises, in January-September 2024, metallurgists increased steel production by 28.2% compared to January-September 2023 - to 5.36 million tons. Although in 2022 this figure was 5.53 million tons.

The Pokrovske mine management also increased production volumes accordingly. According to the results of the 3rd quarter of 2024, the Pokrovskaya Coal Group increased its production of coal concentrate by 17% compared to the previous quarter, to 658 thousand tons, the company's production report states.

"Despite the intensification of military operations in the Pokrovskaya direction, production increased due to the commissioning of an additional bed, which increased production productivity and improved the quality characteristics of Ukrainian coking coal," the company noted.

Anatoliy Starovoyt, head of the coke-chemical association "Ukrkoks", calls the figure of 3.5 million tons - exactly how much coking coal was produced near Pokrovskaya last year.

The Economist notes that in the event of the loss of Pokrovskaya and the retreat of the Armed Forces of Ukraine, Ukraine will suffer a significant blow to the economy due to a decrease in steel exports. Since the beginning of the Russian invasion, steel exports have decreased threefold, and in the event of a new Russian offensive and the capture of Pokrovsk, the next stage of decline will occur.

In the event of the loss of domestic production, Ukraine will be forced to rely on imports, which may lead to a significant increase in the cost of metal products.

This was stated by the president of the Association of Metallurgists and Miners of Ukraine, Oleksandr Kalenkov.

“This is not new for Ukraine, we have been importing some of our coal since 2014, when we produced more steel, and we had only one mine management, Pokrovske, and we had no other choice but to import coal. But now, given that we will lose all production in Ukraine, we will have to increase imports. Why could this be a problem? First, it will further increase the cost, because imported coal will be more expensive, it will still have to be delivered to Ukraine. Secondly, it would be much more profitable to deliver it to the Black Sea ports of Ukraine, but the ports remain a bottleneck for us,” he explained.

In addition, according to him, there is another import option - to deliver to European ports and then transport through Western checkpoints.

“But we all understand that there are also limits on the volumes that we can transport, and this will further increase the cost of this coal. The increase will be different for different enterprises, but it is tens of percent,” says Kalenkov.

The expert believes that plants will need at least 1−1.5 years to rearrange logistics to receive large batches of imported coking coal. As a result, the metallurgical industry will collapse by 50% or more.

Meanwhile, coking coal production on the world market is only growing. Experts say that by 2026, production will increase by 6%. This is stated in the latest report of the Australian Department of Industry, Science and Resources, Mysteel reports.

The expected growth will be mainly due to an increase in exports from Australia. Supplies from this country are expected to grow by 18.5% compared to the level of 2023 and will reach 179 million tonnes in 2026. If these forecasts are realized, the country will account for 48.5% of all global shipments of this raw material.

According to the report, new supplies of Australian coking coal are likely to outpace the closures and suspensions of mine operations by 2026.

The largest buyers of coking coal from Australia are currently India and Japan, in addition, it is shipped to countries such as Germany, Vietnam, the Netherlands and Turkey.

India, in particular, is expected to continue to drive global demand for the raw material, along with the expansion of blast furnace capacity. The country is aiming to reach a target of 300 million tonnes of steel per year by 2030. The country’s metallurgical coal imports could rise by 19.2% to 87 million tonnes by 2026 compared to 2023.

At the same time, China’s demand for marine coking coal may have peaked due to falling steel prices and negative margins in the steel industry. The department revised its forecast for China’s coking coal imports by 2026 to 54 million tonnes, down 15.6% from 2023.

Other key global coking coal exporters are expected to increase supplies only modestly by 2026.

So, as we can see, it is not for nothing that Russians are being sent to die in one of the most difficult areas on the front line - Pokrovsky. After all, Russian oligarchs have been given the opportunity to seize a rather valuable resource.

Minerals for the occupiers

Until 2014, several important minerals were mined in Donbas (the territory covering part of eastern Ukraine, in particular Donetsk and Luhansk regions), which were the main sources of economic development of the region. Among them, it is worth noting coal - after all, until 2014, Donbas was one of the largest coal mining centers in Ukraine and Europe. Donbass coal has a high calorific value and was used in the energy industry, metallurgy and other industries. Coal from this region was the main source of fuel for Ukraine's thermal power plants and for metallurgical enterprises.

Although Donbas is known primarily for coal, there are also deposits of iron ore here. Iron ore was mainly mined in the vicinity of Kryvyi Rih, but also partly within the Donbass. It was used to produce steel in numerous metallurgical plants in the region.

In addition, Donbass has significant deposits of building materials, such as limestone, sand, clay, gypsum, and others, which were used in the construction and cement industries. Limestone is especially important for cement production.

The region was also famous for its deposits of table and technical salt, which was mined, in particular, in the Soledar region, which is one of the largest salt mining centers in Ukraine. Although natural gas production in Donbass was not as large-scale as in other regions of Ukraine, there are also gas fields here, in particular in the west of Luhansk region. Natural gas was used for energy needs. In addition, Donbas was also famous for its amber deposits in the Luhansk region.

After the outbreak of hostilities in 2014 in the Donbass and the occupation of part of the region by Russia, the extraction and use of many of these minerals have significantly decreased or become controlled by illegal structures. Many enterprises have been destroyed, and their production capacities have been lost or reoriented.

During the occupation, Donbas lost 90% of its coal mining industry - these are the figures cited by experts from the Information Resistance.

In 2013, mines and factories in Donbass earned $28 billion, which was 15% of the country's economic output. But two years after Russia's full-scale invasion of Ukraine, the factories that Russia promised to revive in the region lie in ruins. According to the Federation of Employers of Ukraine, 9 out of 15 steel mills in Ukraine have been destroyed or closed behind Russian lines, writes The New York Times.

Lithium as a strategic raw material

Donbas is known for its potential deposits of lithium, a metal that is becoming increasingly important in the global economy.

Lithium is one of the key metals for modern technologies, especially for the production of batteries for electric cars, mobile phones, portable devices and other electronic products. It is known that Ukraine has potential lithium deposits, in particular in the Donetsk and Luhansk regions, which are of interest for mining and processing.

Numerous deposits of lithium ores have been discovered in Ukraine, in particular in the Kryvyi Rih and Zhovtovodsk regions, as well as in certain areas of Donbas. This makes the region strategically important for the future development of the lithium industry, especially against the background of growing demand for this metal in the world.

Advisor to the mayor of Mariupol Petro Andryushchenko noted that in Donetsk the occupiers have agreed on “permit documents” for lithium mining and are now applying for a corresponding license from the Ministry of Natural Resources and Environment of the Russian Federation.

Military expert Oleg Zhdanov noted that Putin has set the goal of the “SVO” to capture the Donetsk and Luhansk regions within the administrative borders. Therefore, the Russians are already distributing permits for mining. Lithium today is a strategic raw material on a par with uranium. According to the expert, the Russian Federation plans to sell Ukrainian metal – that is why it is so desperately trying to capture Donbas.

Is Ukraine ready?

During the annual Yalta European Strategy, Prime Minister of Ukraine Denys Shmyhal noted that Ukraine has 21 elements out of 30 identified by Europe as critical raw materials - lithium, graphite, cobalt, nickel, titanium.

"We are ready to implement processing projects and create value-added goods. European business seeks to protect value-added chains, move production closer to sales markets. We have infrastructure, qualified personnel, and proximity to EU countries. We are capable of being a factory of Europe. Ukraine will be an integral part of the European logistics system. For this purpose, a single logistics space is being created from Lisbon to Kharkiv, from the Baltic to the Black Sea," Shmyhal said.

Some media outlets, both Western and Ukrainian, claim that Volodymyr Zelensky's victory plan also concerns the development of minerals, in particular lithium. Thanks to the development of mineral deposits together with the US and the EU, the Ukrainian leadership wants to receive not only military-political, but also economic security guarantees.

The question is whether politicians and experts, both in Ukraine and in the United States, are ready to promote such an idea? But does the Government Program have such a strategic goal?

Meanwhile, the International Monetary Fund in its report indicates that critically important mineral resources are extremely vulnerable in the event of disruptions in international trade, since their global production is overconcentrated.

For example, two-thirds of the world's cobalt is mined in the Democratic Republic of Congo alone. In total, almost 80% of global production is concentrated in the top three.

More than 50% of lithium production is accounted for by Australia alone. In total, the top three countries account for almost 90%.

The top three countries in the world control about 70% of the market. China controls more than 60% of graphite production. In comparison, oil looks like a much more diversified resource: the top three account for about 40%.

Minerals such as copper, nickel, cobalt and lithium are critical resources for the energy transition. They are used in the production of electric vehicles, batteries and power cables, as well as renewable energy technologies such as solar panels and wind turbines.

For example, to create a typical electric vehicle battery, approximately 8 kg of lithium, 35 kg of nickel and 14 kg of cobalt are required.

Olena Marchenko, specially for Ukrainian Energy