Ukrainian Railways, Ukraine's national gas company Naftogaz and the Ministry of Fuel and Energy of Ukraine have asked the Ukrainian government to cancel its decision No. 925, dated October 14, 2008, stating that as a result of the measures involved they were threatened with disastrous consequences. According to decision No. 925, the surcharge on natural gas prices was annulled and railway transportation tariffs and electricity supply prices were frozen for mining and metallurgical companies in Ukraine.
The measures in question were imposed in order to provide support for Ukraine's mining and metallurgical companies, and are effective up to July 1, 2009.
According to the data issued by the Ministry of Industrial Policy of Ukraine, with regard to railway transportation tariffs alone, in Q1 2009 the country's mining and metallurgical companies saved about UAH 150 million (about $19.7 million); meanwhile, considering the preferential treatment in terms of electricity supply, the mining and metallurgical companies were able to decrease the prime cost of their products by about UAH 1 billion (approx. $131.15 million). On the other hand, the companies did not fulfill their promise to the government to reduce their prices for steel products for the domestic market to the level of their export prices. "The steel product prices in the Ukrainian domestic market are higher than the export prices, some of them even by 25-40 percent," the Ministry of Economy's development department director Oleg Pendzin stated.
Meanwhile, according to local press reports, Ukrainian Railways says it finds itself in an extremely difficult situation, since, due to the crisis, its cargo transportation has decreased by 30 percent since September 2008. Naftogaz and the Ministry of Fuel and Energy of Ukraine have not commented on the situation; however, according to the adviser to the Ukrainian prime minister for gas affairs, Alexander Gudyma, the company is experiencing difficulties every month with payments for imported gas, and that the cancellation of the preferential treatment of the mining and metallurgical companies could improve the situation.
On the other hand, Ukraine's steelmakers are working at 50 percent of total capacity, and in Q1 2009 registered losses of UAH 2.3 billion (approx. $294 million) compared to profits of UAH 2.7 billion (approx. $345.05 million) in the first quarter of last year, says the Ukrainian association of metal producers Metallurgprom. "If the preferential treatment is cancelled, we will, in general terms, halt our operations," Ilyich Iron and Steel Works of Mariupol CEO Vladimir Boyko stated.