Heads of Ukrainian metal companies have addressed the Prime-Minister Vladimir Groisman, asking him to arrange a meeting to discuss the problems in the industry and develop the program of stabilization.
The companies used to address the previous government, but to no avail, while the problems grew.
The first problem is the railroad tariff increase of 15%. According to the Metallurgprom president Alexander Kalenkov and The Ukrainian Federation of Metallurgists head Sergey Belenky, this incentive of the Ministry of infrastructure is absolutely unnecessary.
At the same time Ukrzaliznytsia provides discounts for transportation of iron ore up to 15-20% to Russian producers. This can result in the loss of Eastern European iron ore sales markets. Ukraine gets $11-17 per ton of ore on transportation, while exports in 2015 brought it $50 per ton.
For the past 18 months with the help of Mariupol works Ukrzaliznytsia was able to setup an alternative railroad route, providing only 12-13 trains per day, while Mariupol Ilyich Iron and Steel Works and Azovstal alone need at least 20 trains. Because Ilyich cannot increase output Ukraine could lose some $0.7-1 billion per year.
Ukrainian port charges ($2-3.5 per ton) greatly surpass those of competitors ($0.8 per ton in China, Turkey, Russia, Australia or Brazil) and worsen the positions of Ukrainian manufacturers on foreign markets. While gas transportation fees for industrial consumers ($23.5-27.5 per 1 thousand cubic meters) exceed an average European level of $10-12 per 1 thousand cubic meters, increasing steel prime cost by $1.5 per ton.
Another problem is the scrap deficiency – last year it was on the level of 0.85 million tons, while exports exceeded 1.2 million tons. This resulted in underproduction of 0.78 million tons of metal and the export loses of $150 million. In 2016 scrap situation worsened.
“Reserves of Ukrainian mining and metal complex are running low. In 2015 Ukraine produced just 70% of 2011 level steel. According to the State Statistics Service, in January-September 2015 metal companies received 22.4 billion UAH of net losses. The unsystematic regulation of economy and the ignoring of problems in the complex will result in the destruction of one of the key spheres in Ukrainian industry and will have really bad social and economical consequences for the country”, said metal companies in their letter. (Ukrainian metal)