Metinvest is losing competitiveness due to high tariffs of state monopolies – Vodoviz

Metinvest Group is facing a significant increase in operating costs and a decline in competitiveness, mainly due to high electricity and logistics tariffs, which has already led to the shutdown of Ingulets Mining and Processing Plant (InGOK). This was stated by Oleksandr Vodoviz, Head of the Office of Metinvest CEO, at the Ukraine and the World Ahead conference.

“The two reasons for the shutdown are high tariffs for electricity transmission and railroad transportation. We are not up to par with our anchor markets in terms of cost. And now we see that Ukrzaliznytsia wants to raise tariffs by 37% again. They are proposing an almost fourfold increase in the gas transportation tariff, and the electricity transmission tariff has already been raised by 30%. In such conditions, it is very difficult to think about future development. We have switched on the survival mode and are trying to somehow preserve what we have,” said Vodoviz.

The shutdown of InGOK has deprived more than 4,000 employees of their jobs. The company seeks to employ them at other facilities and provides maximum support, but tariff issues remain critical.

The company calls on state regulators and monopolies, such as Ukrainian Railways and the National Commission for State Regulation of Energy and Utilities, to engage in a dialogue. Vodoviz emphasized that the decisions of these bodies directly affect the country’s business and economy. At the same time, Ukrainian Railways, having about UAH 6 billion in cash, refuses to restructure its obligations, while the private sector is forced to do so.

Another problem is the situation in Pokrovsk, where the only coking coal mine in Ukraine operates. Due to the proximity of the front line, a third of the enterprise is no longer operational.

“If the Pokrovsk mine is occupied, we will have to transport coal by sea. It is economically unprofitable to make steel if coal is delivered by sea. That is why we and our steelmaking colleagues are facing a big question: what will we do if Pokrovsk falls, for example? We understand that the mine is very important for Ukraine’s economy. And the Russians understand this,” explained Vodoviz.

The company is currently trying to relocate employees to safer regions, but many do not want to leave their homes.

Metinvest predicts a challenging 2025 due to continued hostilities, infrastructure destruction and rising costs. Staff shortages are also becoming a significant challenge.

“Currently, the company receives an average of one response from a potential employee for five vacancies. Approximately 10,000 people at Metinvest went through the army. About two thousand have returned,” said the head of the CEO’s office.

The company is investing in socialization of employees and support for their families, but improving the situation requires broader changes in tariff policy and economic recovery.

As GMK Center reported earlier, Metinvest reduced its production of iron ore concentrate (total) by 17% quarter-on-quarter – to 3.35 million tons in Q3 2024. Production of commercial iron ore products in the period amounted to 3.23 million tonnes (-15% q/q), including 1.85 million tonnes of concentrate (-16% q/q) and 1.38 million tonnes of pellets (-14% q/q). Steel production decreased by 1% q/q – to 568 thousand tons, while pig iron production remained at the level of the third quarter of 2023 (483 thousand tons).