News Companies ArcelorMittal Kryvyi Rih 1018 30 December 2024
The increase in tariffs and power outages cause significant losses to the company
PJSC ArcelorMittal Kryvyi Rih (AMKR) reports a significant deterioration in the energy supply situation at the end of the year. Continuous attacks on energy infrastructure, unstable electricity supplies and a sharp rise in tariffs have become critical factors affecting the company’s operations. This was stated by Mauro Longobardo, CEO of ArcelorMittal Kryvyi Rih, in an interview with Interfax-Ukraine.
According to AMKR’s management, electricity cost $267 per MWh for just one day in December, forcing the plant to buy imported energy at extremely high prices.
“Such costs are devastating for the enterprise, especially when the cost of production is much higher than the market price of finished products,” emphasized the company’s CEO.
Energy problems also have a technical impact. Metallurgical equipment is sensitive to power surges. In the event of blackouts, stopping and restarting it can lead to damage and additional costs. This is especially critical for equipment in the “hot phases” of production, which is extremely difficult to restart.
Rising tariffs, including a 37% increase in railroad transportation costs, further exacerbate the financial pressure on the company. The energy component of the company’s expenses already reaches 70%, which significantly affects profitability. According to preliminary estimates, AMKR’s losses in 2024 will amount to about $100 million.
The government has recently reduced the share of imports or domestic electricity production that exempts companies from blackouts from 80% to 60%. However, this is of little help to AMKR. Imported electricity remains much more expensive, especially during peak hours when the difference between the cost of imported and domestic energy becomes critical. In particular, in winter, peak hours occur twice a day, which further complicates the situation.
The plant is forced to look for ways to optimize. The measures include reducing electricity consumption, temporarily restricting the operation of some equipment and shifting the focus to less energy-intensive production processes.
Despite the challenging environment, AMKR continues to operate and remains an important player in the Ukrainian steel industry. The company’s management expects the energy situation to stabilize in 2025, which will allow it to gradually increase production and reduce financial losses.
At present, the forecasts for future production volumes remain influenced by the government’s actions to increase electricity and railroad tariffs, establish a process for booking employees, and the state of the global steel and iron ore market.
As GMK Center reported earlier, ArcelorMittal Kryvyi Rih has reduced its steelmaking capacity by up to 30% since November 2024 and plans to operate in this mode during the first quarter of 2025. The company is forced to adjust its production levels due to unfavorable global market conditions, a decline in prices for iron ore and steel both in Ukraine and globally, and rising electricity prices.
