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Only the Central Mining and Processing Plant will continue operations, the only BF will operate at Kametstal

Metinvest Group announced the suspension of operations at the Southern, Ingulets and Northern mining and processing plants. Southern, Ingulets will be suspended from July 1st, and Nothern – from mid-July.

According to the Metinvest`s press release, Kametstal will also stop one blast furnace from July 1st and continue it`s operations with one remaining BF. Only the Central GOK will continue to work, but with reduced utilization, among all iron ore plants of Metinvest.

The company explains this decision through challenging logistics, high costs of steel production and external factors, namely significant drop in iron and steel prices and reduction in demand for raw materials.

“The suspension of activity in iron ore and steel production is a forced measure, which the Group has postponed as much as possible from February 24th at the expense of its own reserves,” the statement said.

At the same time, Metinvest emphasizes that it will continue to fulfill its obligations to employees, as well as provide assistance to refugees, implement projects to support the Armed Forces of Ukraine, etc.

“This situation has no precedent. The average capacity utilization of the stopped iron ore plants of the company in June was already low – 30%. At the same time, a sharp reversal of prices on the global market in mid-June made any export unprofitable. Therefore, it was no longer possible to further reduce the utilization. Today we see the price in China at $115-120 per ton. A year or two ago, this price would allow domestic iron ore plants to work successfully. But several years of inflation with a strong hryvnia exchange rate led to an increase in costs in US dollar equivalent. In 2021, cash costs of iron ore production in Ukraine, according to our calculations, increased by 30%. In 2022, the increase in energy prices led to an additional increase in production costs by another 30%. Wartime logistics and the associated costs added significant challenges to iron ore companies. The situation was aggravated by short-sighted regulatory policy, when royalty rates for iron ore mining were raised twice in two years. As a result, the whole successfully working industry sector became unprofitable,” Andrey Tarasenko, Chief Analyst of GMK Center, commented on the event.

It should be noted that in mid-March, Metinvest Group CEO Yuri Ryzhenkov said that Kryvyi Rih iron ore plants operated at 30% capacity.

Metinvest Holding LLC is the management company of Metinvest Group. Metinvest’s main shareholders are SCM Group (71.24%) and Smart Holding (23.76%), which jointly manage the company.

In 2021, Metinvest increased steel production by 15% compared to 2020, to 9.5 million tons, pig iron, by 15%, to 9.7 million tons, and iron ore concentrate, by 3%, to 31.34 million tons In 2021, Metinvest Group ranked 42nd among the world’s largest steel producers.

In the first quarter, the Group reduced total concentrate output by 21% to 6.13 million tons and steel production by 8% to 1.96 million tons.

Northern mining and processing plant is one of the largest iron ore plants in Europe. It has a full cycle of iron ore production. It produces iron ore concentrate (Fe 66%) and pellets (Fe 62%, 63% and 65%). In 2021, it increased the production of pellets by 20.2% compared to 2020, to 6.35 million tons. The output of iron ore concentrate increased by 5.2% over the year, to 13.4 million tons.

Central mining and processing plant is one of the five largest producers of iron ore in Ukraine. It produces concentrate with Fe content of 65% and 68.2%, as well as pellets with Fe content of 63.9%. In 2021 Central mining and processing plant reduced the production of iron ore concentrate by 2.1% to 4.8 million tons and the production of pellets by 0.5% to 2.26 million tons.

Inguletsky mining and processing plant produces two types of concentrate with Fe content of 64.8% and 67%. In January-November 2021, the plant increased the production of iron ore concentrate by 8.5%, to 11.8 million tons.

Southern mining and processing plant produces iron ore concentrate and sinter. In 2021, the plant increased the output of iron ore concentrate by 5.5% to 13.5 million tons. The output level is the highest in the last 30 years.