Executive Director of UkrFA – about the current situation in the ferroalloy industry

Like the entire iron and steel complex of Ukraine, the ferroalloy and mining enterprises of the industry suffered greatly from the consequences of the military aggression of the Russian Federation against Ukraine. Missile attacks on the Ukrainian energy infrastructure at the end of last year significantly worsened the situation for the ferroalloy industry, which depends more than others on a stable energy supply. As a result of these strikes, the enterprises of the industry temporarily stopped their work partially or completely. Sergiy Kudryavtsev, executive director of the Ukrainian Association of Ferroalloy Producers (UkrFA), told about the results of the industry’s enterprises in 2022 in the interview with GMK Center.

What production indicators demonstrated the ferroalloy industry in 2022? How busy were businesses on average last year?

– Ferroalloy enterprises of Ukraine in January-August 2022 reduced production by 32% compared to the same period of the previous year – to 399.46 thousand tons. In particular, during the last 8 months of the year, production decreased as follows:

  • silicomanganese – by 22.2% y/y, to 356.5 thousand tons;
  • ferromanganese – by 70.7%, to 20.7 thousand tons;
  • ferrosilicon (in terms of 45%) – by 63.4% y/y, to 19.7 thousand tons;
  • metallic manganese – by 62.4% to 1.8 thousand tons.

Also, 0.74 thousand tons of other ferroalloys were produced in January-August 2022.

After October, due to the impact of strikes on the country’s energy infrastructure and the resulting reduction in production, enterprises stopped providing updated statistics. The average loading of enterprises in the industry at the end of 2022 was at the level of 30% compared to 60-70% in April-May.

The Pokrovsk Mining and Processing Plant (PGOK) produced 497.1 thousand tons of manganese concentrate in 8 months of 2022, which is 34.4% less than in the same period of 2021. Also, in January-August, PGOK produced 29.55 thousand tons of sinter ore (-84.8%) and delivered it to the Dnipro Metallurgical Plant. In 2022, Manganetsk GOK reduced the output of manganese concentrate by 41.2% – to 324,000 tons.

What is the current situation at ferroalloy plants? How was the work of the industry affected by interruptions in the supply of electricity in October-December 2022?

– Given the strong energy dependence and high specific weight of the cost of electricity in the production of ferroalloys, the situation in the industry is extremely difficult. For example, since the end of October, the Pobuzhsky Ferronickel Plant (PFP) was forced to stop production due to damage to related energy facilities. In addition, this enterprise, which depends on imported raw materials, cannot currently count on its stable flow due to the blocking of ports.

The situation at the Nikopol Ferroalloy Plant (NFP) and the Zaporizhzhia Ferroalloy Plant (ZFP) is also extremely difficult – the enterprises are operating at minimum capacity. Factories are in the system of the balancing market, so they can increase or decrease the volume of energy supply at any time.

What were the dynamics of prices for ferroalloys in 2022? What are your expectations for 2023?

– Quotations of ferroalloys with a lag of a month or a half repeat the dynamics of prices for ferrous metals.

Immediately after the beginning of the military aggression of the Russian Federation in Ukraine, the prices of ferroalloys rose sharply, as panic gripped the markets and buyers stockpiled products. The spring price increase for ferroalloys improved the financial situation of producers, especially against the background of rising energy costs. However, this trend did not last long, as end consumers were forced to cut production.

China plans to halve the production of ferroalloys, which will cause a shortage of supply in the market there, and subsequently an increase in domestic and global prices for ferroalloys. At the same time, the European production of ferroalloys is seriously affected by the energy crisis, which began even before the Russian invasion of Ukraine.

How did companies in the ferroalloy industry solve logistical problems? How was the logistics reorganized?

– Enterprises are working on importing raw materials and sending products across the western borders of Ukraine. However, in these options, it is important to take into account the high cost of logistics, in particular the increase in railway tariffs of Ukrzaliznytsia and constant delays of goods in transit.

Last year, due to problems with logistics and other consequences of the war, exports were limited. Did the companies of the industry have to reorient themselves to other sales markets and other sources of raw materials? To which countries did exports go?

– Last year, the countries – sources of raw materials and export markets for Ukrainian ferroalloy plants did not change. The main consumers of Ukrainian ferroalloys in the 11 months of 2022 were Poland (53.8% in monetary terms), the Netherlands (13.9%) and Romania (5.8%).

In general, in January-November 2022, enterprises of the industry exported 318.8 thousand tons of ferroalloys, which is 48% less than in the same period of 2021. Export revenue for 11 months of 2022 decreased by 42.7% – to $532.3 million.

The ferroalloy industry is highly dependent on electricity tariffs. Are you conducting a dialogue with the authorities on curbing the growth of dispatching tariffs and other components of electricity price formation?

– Now is not the time to negotiate acceptable energy tariffs. Due to the Russian strikes, both generating and power distribution facilities are constantly suffering. The situation is changing so quickly that there is no stable topic of discussion (guaranteed energy supply) yet.

Are there problems with personnel in the enterprises of the industry?

– On the one hand, constant threats to security lead to the outflow of personnel from enterprises. On the other hand, factories are mostly idle, so enterprises simply do not have the production load for a certain number of personnel.

In your opinion, what will be the situation in the ferroalloy industry in 2023?

– We will count on the good, on the end of hostilities. After the stabilization of the situation, ferroalloy plants will be able to quickly increase production with the appearance of sufficient volumes of energy supply.