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Tuesday, May 17, 2022

Explained: Why the loss of Mariupol steel plant, a holdout for the city’s resistance, matters

If the Russians stake a claim over the Azovstal plant, Ukraine will lose control over an integral port city along the Sea of Azov as well as one of its largest steel mills. We take a look at its significance, history and ownership.

Written by Sonal Gupta , Raghu Malhotra | New Delhi |
Updated: May 10, 2022 12:57:58 pm
A view shows an explosion at a plant of Azovstal Iron and Steel Works during Ukraine-Russia conflict in the southern port city of Mariupol, Ukraine, May 8, 2022. (Reuters)

The Azovstal steel mill, which is the last pocket of Ukrainian resistance in the devastated port city of and Mariupol, has a symbolic value in the broader battle since Russia’s invasion. It has been under intense attack by the Russian military for weeks with around 2,000 Ukrainian soldiers believed to be holed up in the maze of over 30 tunnels and bunkers beneath the plant. As of Sunday night, the last of the civilians taking refuge in the plant were evacuated.

For Russia, the plant holds key to the takeover of Mariupol as it plans to build a land bridge between Crimea – which it annexed in 2014 – and Dobass, the separatist-held regions of Ukraine. If the Russians stake a claim over the Azovstal plant, Ukraine will lose control over an integral port city along the Sea of Azov as well as one of its largest steel mills.

Azovstal’s tryst with invasions and disputes

Spread across 11 square kilometres, the Azovstal steel plant has been witness to invasions since the second World War.

Set up in the 1930s by the Soviet Union under Joseph Stalin, the plant began producing its first iron in 1933. Steelmaking began in 1935. However, in 1941 the plant shut its operations in the wake of World War II. According to a Harvard University information bulletin, the equipment from the plant was sent to Germany for the war effort. During the retreat of the German troops in 1943, the plant was blown up.

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Over the next two years, the furnaces were restored and the plant gradually returned to operation. According to the company’s website, it was the first in the country to start producing 25-m long rails.

In 2006, Azovstal became part of the Metinvest group and is now among the largest producers of cast slabs, besides manufacturing other products like rolled plates, rails, rail fasteners, neon and others. Owned by Rinat Akhmetov as his company SCM is the largest shareholder, it is one of the largest metal works factories in Europe, with the capacity of producing 5.7 million tonnes of iron and 6.2 million tonnes of steel per year.

Akhmetov, born in Donbass, was caught in a political storm in November 2021 with Zelenskyy accusing the oligarch of being involved in a Russia-backed coup planned against him. Zelenskyy’s relationship with oligarchs in the country was said to be strained as he rose to popularity with an anti-elite stance. Assuming power, the President had signed an “anti-oligarch law” that restricts them from financing political parties and taking part in privatisations.

However, the war has helped smoothen relationships, with Akhmetov, in a recent interview, praising Zelenskyy for “showing true dignity in fulfilling his constitutional duty to defend Ukraine”. “I am proud that Azovstal is our bastion of resistance,” he had said.

How the plant became the centre of Russia’s offensive

Long before Azovstal became a key battleground in Ukraine, it played a dominant role in the port city’s economy. But now, amid a devastating war and a weeks-long siege by Russian forces, the sprawling industrial park is no longer producing steel.

Azovstal supplies semi-finished and finished products to Italy, Turkey and the UK, and employs over 10,000 employees, according to think tank GMK Center. In the nine months ending September 30, 2021, Azovstal accounted for 3,156 kt of Metinvest’s crude steel production, while Ilyich produced 2,995 kt. In 2020, Metinvest was among the top 50 steel-producing companies in the world.

Ukraine, similarly, was the 14th largest producer of crude steel globally in 2021. The steelmaking industry along with related sectors, accounted for 12 per cent of Ukraine’s GDP in 2018 and 23 per cent of its exports. In 2019, Ukraine was among the top 10 countries exporting semi-finished and finished steel products in the world. Hence, losses in the steel industry would have a direct hit on the country’s economy — a fate that it had encountered in 2014 when it lost control of five steel plants after the Donetsk and Luhansk regions broke away.

Besides the economic impact on Ukraine, a control of the plant would also give Russia a clear passage to controlling the port facilities on the Sea of Azov. Russia would also be able to construct the land bridge between Dobass and Crimea, thereby taking control of the entire northern shore of the Azov Sea, helping them to launch an offensive in other parts of Ukraine.

How does it affect the future course of the war?

Apart from the impact on the steel and iron ore trade globally, the ongoing war can also upend the semiconductor industry. In 2014, Russia’s invasion of Crimea had led to a 600 per cent surge in the cost of neon, a byproduct of steel manufacturing and essential raw material for chip manufacturing, Financial Times reported. Fifty per cent of the world’s neon supply comes from Ukraine.

Metinvest in a statement said that the plants in Mariupol account for a third of Ukraine’s metallurgical production and with the war, the country has lost 30-40 per cent of its production capacity. While Russian shelling has destroyed the sites, the extent of the damage is yet to be determined. The company has also asserted that while production would resume after the end of hostilities, they would only work as long as Mariupol remains under Ukraine’s control.

The takeover of the major port city would also restrict Ukraine’s access to international trade. In an interview with National Public Radio in March, Rita Konaev, an expert on Russian military from Georgetown University, had said: “It’s part of a broader effort to effectively cut off Ukraine from access to the sea, which is a really important part of the country’s economy and trade.”

Since the beginning of the war on February 24, Mariupol has been one of the worst-hit cities in Ukraine, with the mayor Vadym Boychenko claiming on April 11 that over 20,000 civilians have been killed by Russian forces.

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