Impact on the Group activities HI 2024

THE IMPACT OF THE ARMED CONFLICT IN UKRAINE ON THE GROUP'S ACTIVITIES

The war in Ukraine and sanctions imposed on Russia have caused a reorganization of the global coking coal market. Before the war in Ukraine, Russia’s share of coking coal imports to the EU was: approx. 10% for coking coal and approx. 30% for PCI coal. After the introduction of the sanctions, Russian coal was diverted to the Asian market, mainly to India and China. The missing volumes in the European market were supplemented by supplies from Australia and the US. The sanctions imposed on Russia have not significantly reduced the supply of coking coal on global markets, but they have changed the direction of trade. At present, the share of imports of coking coal from Russia in the total Chinese imports increased from approx. 7% in 2016-2020 to approx. 28% in 2023. China lost the status of clearing market in maritime trade of coking coal in favor of India.

In Q2 2024, global coking coal prices were more affected by supply changes in Australian and American mines, the internal situation in China, and growing demand from India than by the armed conflict in Ukraine and sanctions imposed on Russia. Globally, the war in the territory of Ukraine has resulted in a less stable economic situation, slower GDP growth, higher inflation and rising interest rates. JSW monitors the economic situation on an ongoing basis to assess its potential negative impact on the Group and take measures to mitigate this impact. In addition to threats, the war in Ukraine also creates market opportunities for the Group's operations. Ukraine will need a considerable amount of steel, among others, to rebuild housing and social infrastructure destroyed by the Russian invasion, as well as mining machinery and equipment. Some European steel companies are preparing for responding quickly to demand from the Ukrainian market, which is to grow with the end of the war, driven by numerous projects for rebuilding the country. Ukraine is struggling with a serious shortage of production capacities and its demand for steel, according to analysts, may increase four times. The Ukrainian government intends to begin quickly to repair railroads and railway lines destroyed as a result of war with Russia with the aid of subsidies from the International Bank for Reconstruction and Development. According to the estimates of expert agencies, the total cost of reconstruction and revitalization of Ukraine over the next decade is estimated at over EUR 453 billion.

Source: Management Board Report on the Activity of the Jastrzębska Spółka Węglowa S.A. Group for the period of 6 months ended 30 June 2024