KZRK declares crisis due to VAT debts and power outages

Kryvyi Rih Iron Ore Plant (KZRK) has asked President of Ukraine Volodymyr Zelenskyy to intervene in the critical situation with value added tax (VAT) refunds and power supply problems.

According to an open letter from the administration and trade unions, the state’s VAT refund debt to the company is over UAH 330 million. Of this amount, UAH 180 million was not refunded between January and July 2024, and another UAH 150 million has accumulated since July, when the plant lost the ability to claim refunds in accordance with the law due to the presence of sanctioned shareholders.

These funds are critical for the plant’s operations, as it is through working capital that the company pays salaries, pays taxes, provides energy and maintains the production process.

In addition, on November 29, the power distribution company disconnected KZRK from electricity supply due to accumulated debts. This further complicated the situation and led to a delay in the payment of salaries to the plant’s employees on December 6. In its appeal, the administration emphasizes that without power supply, the company cannot actually function, and the production process is halted.

Amid the crisis, KZRK also announced a collective labor dispute with employees demanding a 20% salary increase and a return to a full working week. The administration has already agreed to raise salaries from January 1, 2025, but further implementation of the agreements depends on the stabilization of the financial situation.

The company emphasizes that resolving the VAT issue and restoring energy supply are key steps to help the company overcome the crisis.

The situation is also complicated by the reduced demand for KZHRK’s products both in the domestic market and abroad, which leads to the accumulation of iron ore stocks in warehouses.

As GMK Center reported earlier, in 2023, KZRK reduced the production of commercial iron ore from underground mining by 24.4% compared to 2022, to 2.18 million tons. The company’s production plan for the year was fulfilled by 94.9%.

Kryvyi Rih Iron Ore Plant (KZRK) is the largest sinter ore producer in Ukraine. Most of its products are exported to Eastern Europe. The company includes 4 mines. The company’s balance sheet reserves amount to 210 million tons of rich iron ore with an average iron content of 58.6%.