In 2024, ferroalloy plants produced 108 thousand tons of products

Last spring, Ukraine’s ferroalloy plants resumed operations with minimal capacity utilization, so production results were expectedly modest. Production capacity utilization did not exceed 6%, and mining capacities continued to be idle.

The problems constraining the development of the industry remain unchanged: high cost of electricity and logistics, as well as lack of personnel. At the same time, the main risk for the enterprises of the industry is being in the zone of active military operations. Despite all the difficulties, the enterprises of the industry are looking for opportunities to increase production and start the operation of idle mining and processing plants.

Current situation in the industry

The industry resumed operations in April-May last year after a forced shutdown in the fall of 2023. In 2024, ferroalloy enterprises of Ukraine reduced output by 49.4% y/y – to 108.2 thousand tons. In particular, last year’s production decreased in the following way:

• silicomanganese – by 45% y/y, to 104.2 thousand tons;
• ferromanganese – by 66.5%, to 3.6 thousand tons;

Output of ferrosilicon (in terms of 45% y/y) and other ferroalloys amounted to 0.12 tons and 0.28 tons, respectively. There was no production of metallic manganese and manganese concentrate last year.

The main current problems of the industry include the following:

1. All of our operations are located primarily in an active war zone, with all the inherent risks to equipment and personnel.
2. Ferroalloy operations are heavily impacted by high electricity prices. Electricity prices for industrial consumers in Ukraine are now often several times higher than in developed European countries. In addition, the industry pays 100% prepayment for electricity for the next month. For us, this is a significant frozen working capital. And if there is no electricity for two days after another shelling, no one will compensate us for these losses.
3. Shortage of personnel due to constant mobilization and staff leaving for safer areas.
4. Logistical problems. We face the high cost of handling port cargo in the ports of Great Odessa. We could move to the Danube, but it is even more expensive there due to the increased shoulder of railroad cargo transportation and low vessel load volume. Now we transport finished products to Romania via the Danube and import small volumes of ore under the old contracts.

Industry exports

At the end of last year, the industry enterprises reduced exports of ferroalloys by 4.5 times – to 77.3 thousand tons from 344.2 thousand tons in 2023. Exports were made to the markets close to us: Poland (27.4% of supplies in monetary terms), Turkey (21.5%) and Italy (19.8%).

However, we are gradually being pushed out of the Italian market, which has become traditional for us, from which we pushed out producers from North Africa 10 years ago. Now Ukraine is being squeezed out of there by Kazakhstan due to price non-competitiveness. Thus, if we want to return to the lost export markets, it will be quite problematic for us because of the high cost factor.

Trade restrictions are becoming more and more frequent in our traditional markets due to the growth of protectionism. The European Commission initiated a protective investigation of imports of some ferroalloys. On the one hand, this decision was quite unexpected, as the very fact of initiating an anti-dumping investigation against everyone is not peculiar to the European Union. On the other hand, the reason for such a decision must be very strong. We believe that this reason was the sharp, uncontrolled growth of imports of ferroalloys from Kazakhstan. This country has a significant competitive advantage – low cost of energy resources.

Ukraine currently has a preferential trade regime with the EU, so our export ferroalloy products will not be considered under this investigation. However, our preferential regime expires in June. What will happen next – we do not know yet. The list of possible solutions is very wide – from adding our ferroalloys to the list of investigation products and introducing quotas to continuing the preferential trade regime.

Market expectations

Due to low production volumes, high energy costs, lower prices for products on global markets, the general mood in the industry is largely negative with an element of uncertainty. We do not know if we will produce in February and where we will sell to.

The key issue for us is electricity. If the issue with the cost of electricity and stability of its supply for industrial consumers in the frontline areas is resolved, it will become a prerequisite for increasing production at ferroalloy plants and resuming the work of mining and processing plants. At least the Pokrovsky GOK is considering the possibility of launching the enrichment plant in April, as the stocks of finished products will run out by June.

We very much hope that the development of the domestic industry is in the pool of the state’s interests. In order to support the sector, the authorities must solve the situation with rising energy prices. Otherwise, our industry will simply disappear, and Ukraine will not have its own production of ferroalloys and armor steels.