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This can trigger a chain reaction that will negatively affect related sectors of the economy and exacerbate the economic crisis

Ingulets Mining (InGOK), part of Metinvest Group, may shut down completely due to the Cabinet of Ministers’ decision No. 611, according to which electricity supply guarantees will be provided only to those companies that import 80% of their needs.

This is stated in a letter from Igor Tonev, Director of InGOK, to the Prime Minister and a number of heads of parliamentary committees, a copy of which was exclusively obtained by GMK Center.

On May 30, the meeting decided to increase the previous rate from 30% from May to September and 50% from October to April to 80%. However, there was no prior proper discussion or debate, which deprived consumers of the opportunity to express their comments and suggestions.

«The increase in the rate of purchase of imported electricity to 80% of the total needs of the enterprise forces the industry to increase the volume of electricity imports accordingly, which stimulates an artificial increase in demand at auctions for the distribution of interstate crossings and leads to a speculative increase in prices for imported electricity. Given that the cost of electricity during peak hours before the adoption of this resolution already ranged from 160 to 200 euros/MWh, further price increases pose a serious threat to industrial enterprises,” the letter says.

Igor Tonev points out that electricity costs at Ingulets Mining account for 51% of the cost of iron ore production. Meanwhile, an increase in electricity costs could negatively affect the company’s competitiveness in the international market.

«The purchase of imported electricity in the amount of 80% of its own consumption is becoming unaffordable for InGOK due to the high price, which could lead to a complete shutdown of the plant. Only one shutdown of InGOK alone will result in a 2.7 million tonne reduction in iron ore production in Ukraine, which will lead to a 4 billion UAH drop in GDP, a 0.7 billion UAH loss in tax revenues and about $150 million in foreign exchange earnings,” the letter says.

It is noted that stopping the production of iron ore products will lead to a decrease in rail and sea transportation, as well as a decrease in demand for engineering products. This could trigger a chain reaction that would negatively affect related industries and exacerbate the economic crisis.

Based on the above, Ingulets GOK requests the Cabinet of Ministers to consider the following:

1. Return to the previous conditions of energy supply guarantee (30% from May 3 to September or 50% from October to April) or adjust the import rate to 50% throughout the year.

2. Increase regional consumption limits on the volume of imported electricity.

As GMK Center reported earlier, Metinvest’s Kryvyi Rih iron and steel plants, Central, Ingulets and Northern Minings, spent a total of UAH 2.3 billion in 2023 to maintain production facilities.

Iron and steel companies pay taxes responsibly, supporting state and local budgets in a difficult period of war. According to GMK Center’s research, in 2023, Ukraine’s largest iron and metals steel paid over $1 billion in taxes.