Volodymyr Kolos: Rudomine operates at the level of 50% of pre-war volumes

In addition to the consequences of the military aggression of the Russian Federation against Ukraine, Ukrainian mining enterprises in their activities faced logistical difficulties in the sale of products and a drop in external demand for iron ore. In particular, in September 2022, as in previous months, there was a negative trend in rail transportation of iron ore. Ukrzaliznytsia (UZ) reduced the transportation of iron and manganese ores by 21.2% compared to August 2022 – to 1.49 million tons. However, the main evidence of the difficult situation in the industry was the shutdown of several mining plants in June-July 2022 and the average workload of enterprises at the level of 25% of the pre-war volumes.

The head of Rudomine LLC Volodymyr Kolos told GMK Center about the situation in the world iron ore market, the company’s current activities and how it overcomes existing problems.

How is the company working now, in the conditions of war in the country? What has changed?

– Nothing changed. We continue to work stably. Only the volume of production has decreased.

What is the average download rate?

– It is reduced by half. The shipment of products is up to 50% of the pre-war volumes.

What is the reason for the decrease in shipment volumes? What are the problems – ports, railways or logistics?

– This is a combination of many factors – problems with logistics, and the fact that Europe reduced its orders and partially reoriented itself to other suppliers. Due to the situation in Ukraine, European clients have played it safe and are ordering iron ore from Brazil and other South American countries. Now we have reduced production because of the hostilities, and they need a steady supply. Therefore, they order products from countries where there is no war. Now our situation has more or less stabilized. 50% today is not bad compared to other large enterprises. Their situation is worse.

What contributed to this stabilization?

– The smaller the enterprise, the easier it is to respond to any challenges, unexpected turns of fate. Therefore, it was easier for us, unlike giant enterprises, to influence the cost of our production, to squeeze in somewhere, to reformat and to rebuild.

Were the exports of Rudomine oriented towards ports?

– No. The economic factor played the biggest role here. The production of large enterprises has a high cost price. In addition, their usual logistics were disrupted, as they were focused on ports. And we have railway logistics. Therefore, as long as the railway is functioning, we are also working.

Perhaps, Chinese iron ore producers won in this situation? Has the entry into the Chinese iron ore market affected the cost of your products?

– Rather, the world cost price of iron ore is dictated by the Chinese market. The world market of iron ore is clamped in China. And iron ore prices fell in half. Accordingly, who reduces his cost price will survive.

Didn’t you have to put the project of the Dolynsk Mining on hold?

– No, the process of implementing this project has not been stopped, project research works are underway. Based on this, project documentation will be ordered after the end of hostilities.

What factors will make it possible to return to the pre-war volumes of the enterprise’s work?

– There must be a set of factors here. Consumers should increase volumes, and the prices of iron ore should increase at least a little. Then we will be able to plan for output growth to last year’s level. And, of course, our products must be competitive – we are talking about quality indicators.

There is a risk that consumers of our iron ore, who have now switched to producers from other countries, may not return to us. In order for clients to reorient themselves to us again, there must be peace in the country – this is one of the key factors for them.

For European iron ore consumers, the situation has become even more complicated. Now their economy has to survive in new realities, because gas and electricity have become more expensive. Therefore, it is also difficult to make steel competitive. Therefore, it is important for us whether producers of rolled steel will be able to «fit» into the world prices of iron ore, because there is also a noticeable decline in this market, both in terms of consumption and price.

What anti-crisis measures did your company resort in order to survive?

– First of all, this is a reduction in the cost price – mainly by reducing the work aimed at the long-term prospect of the field’s development.