Major Ukrainian steelmaking group Metinvest is going to stop operations at three mining facilities and one blast furnace by the middle of July due to logistical challenges while transporting volumes to the EU and economic factors like rising production costs and falling product prices, according to a company note issued on June 29.
From July, the production at two mining facilities of the group - Southern and Ingulets - will be suspended, while the third mining asset - Northern - will stop work from mid-July. “Of the group's mining and processing plants in Ukraine, only the Central one will continue to operate at reduced capacities,” the company said.
Also, one out of two working BFs at Kamet Steel, located in the city of Kamianske, Dnipro region, in central-east Ukraine, will suspend production from July 1.
Among the main reasons behind this decision were transportation issues as all seaports remain blocked by Russia and shipments are possible only by rail. “Compared to pre-war times, logistics costs have increased several times. Also, stocks of metal products are accumulating along the entire supply chain, our finished products have been queuing for months at the border with the EU,” Metinvest said.
Costs of production in Ukraine have also been on the rise due to the increase in energy prices, in particular natural gas, and raw materials, while due to the war domestic consumption has fallen by over two thirds compared to February.
Furthermore, steel and pig iron prices have posted sharp drops in the global market, while demand for steel and iron ore, in Europe in particular, has been reduced as steel production in the region itself has been going down.
In addition, Zaporizhstal Iron and Steel Works, a JV of Metinvest, is also planning to cut production from the current rate of 50 percent, naming logistical issues as the major problem.