Exclusive Under what conditions is the Zaporizhzhia Ferroalloy Plant currently operating?

Due to the high cost of electricity, which accounts for 53% of production costs, the operation is unprofitable

Due to the war and the energy crisis, Ukraine’s ferroalloy industry is on the brink of collapse. Plants are operating on the verge of shutdown due to exorbitant electricity costs and a logistical breakdown in the combat zone. Under these conditions, there is a need to restore direct dialogue between the industry and the government.

This was stated by Dmytro Mishchenko, Deputy Chairman of the Board and Commercial Director of the Zaporizhzhia Ferroalloy Plant (ZZF), during his speech at the “Ferrous steel industry of Ukraine 2026” conference organized by Metal Expert. GMK Center presents the key points of the speech.

Current situation at the plant

As of today, ZZF is operating under conditions of critical production cuts:

• production capacity: approximately 50,000 tons per month;
• production in January 2022: 21,000 tons per month;
• production in April of this year: 2,000 tons per month (less than 10% of pre-war levels);
• number of furnaces: 31, of which only 3 small ones are currently operational;

As of early 2022, the company employed 3,000 people. As of today, there are 1,046, of whom 344 are on mobilization duty. In fact, about 700 employees are currently active, which is more than four times fewer than before the start of the full-scale invasion. In total, about 500 people have been mobilized during the war, 42 of whom have been killed.

Impact of electricity costs

ZZF is an energy-intensive enterprise: electricity accounted for 53% of production costs in April of this year. This is the main reason for the unprofitability of production.

Price trends on the day-ahead market (DAM):

• February 2026: on some days – up to €300/MWh (about 15,000 UAH);
• March 2026: average price – €139 + €20 transmission/distribution = ~€160;
• first 20 days of April 2026: average price – ~€99 + €20 = ~€120;
• as of April 20, 2026: price rose to ~€140 + €20 = ~€160.

For comparison: competitors—Ferroglobe and Eramet—have production capacities in Norway (€30–40/MWh), Spain, and France (€48–60/MWh). Thus, Ukrainian producers pay more than twice as much for electricity, which makes competitive production impossible.

The cost of smelting one ton of silicomanganese is approximately 6 MWh. At a price of €160/MWh, the cost of electricity alone per ton of product is about €960. The current market price for silicomanganese is about €1,130/t, leaving only €170 to cover the remaining costs: labor, taxes, raw materials, logistics, and delivery to the EU. This makes any profitability practically impossible.

At the NEURC meeting on April 23, 2026, a new resolution is scheduled for consideration that could set price caps of up to 15,000 UAH/MWh around the clock starting May 1. This will further worsen the company’s financial situation.

According to the company’s estimates, profitable or break-even production would be possible if electricity prices returned to the January 2021 level—approximately 3,600 UAH/MWh (total price including transmission and distribution). Without this or a similar support mechanism, continued operations will be unprofitable.

Market conditions and product sales

ZZF has entered into annual contracts with major Ukrainian steel producers: Metinvest, ArcelorMittal Kryvyi Rih, Dniprostal, and Dniprospetsstal. The volume of supplies accounts for over 70% of these companies’ demand for ferroalloys. The domestic market is a priority sales channel, as it allows for prompt payment and incurs no additional logistics costs.

Competition in the domestic market comes from imports supplied by Ferroglobe and Eramet (accounting for about 30% of the market). The presence of imports disciplines pricing and restrains excessive price increases for consumers. If domestic producers exit the market, Ukrainian steelmaking enterprises will be forced to purchase ferroalloys exclusively from foreign suppliers at higher prices.

A small volume of production is sold for export. Such exports are unprofitable due to the lack of VAT refunds, but they allow for foreign currency revenue to partially cover current expenses. Full-scale competitive exports to EU markets are currently impossible due to electricity costs that are twice as high as those of European competitors.

Raw material supply and logistics

The company operates exclusively on domestic manganese ore from the Pokrovsk and Marganets Mining and Processing Plants. Despite the ore’s high phosphorus content, the company has adapted its production technology (by adding slag) and produces products of European quality. Ore reserves are secured through the end of the year with a small top-up from suppliers. At the same time, the condition of the mining and processing plants themselves is critical: the companies are on the verge of bankruptcy, and their stability in 2027 is in serious doubt.

Imported ore is not considered an alternative: the minimum shipment sizes for sea deliveries (50,000 tons) are too large for the company’s current needs and require significant working capital.

Since May 2025, the company has fully switched to coke supplies from Poland due to the shutdown of the Dnipro Coke Plant. There is a possibility of a partial resumption of supplies from Ukrainian producers (in particular from ArcelorMittal Kryvyi Rih, which is considering shutting down part of its production). Coal is purchased from DTEK in insignificant volumes.

Key challenges facing enterprises in the combat zone

The Marganetsky Mining and Processing Plant and the Pokrovsky Mining and Processing Plant are unable to pay their employees the minimum retention bonus of 20,000 UAH, as operations have been suspended due to hostilities. In this regard, it is proposed to amend the relevant resolution: enterprises located in the combat zone that are critical to the functioning of their city should be granted the right to retain staff—at least the portion necessary to ensure the uninterrupted operation of emergency equipment, particularly in mines.

Rail routes between Marganets and Nikopol, which previously facilitated the transport of manganese ore, are currently not operational due to constant shelling. As a result, ore from the Marganets Mining and Processing Plant is transported via Kryvyi Rih, which significantly increases the logistics distance and transit time. This route is economically unfeasible: the enterprise cannot cover its production costs. It is proposed to consider the restoration of the original route or an alternative route with the participation of Ukrainian Railways.

Relations with the government and systemic issues

The company does not feel it has direct communication with the government. Previously, the Ministry of Industrial Policy served as a communication channel between industry and the Cabinet of Ministers—decisions were made with a delay of 1–3 months, but communication existed. Today, this mechanism is effectively non-existent.

An example of ineffective communication is the situation with the CBAM mechanism: the industry warned in advance about the risks of the EU’s carbon border adjustment mechanism taking effect on January 1, yet the government assured stakeholders that negotiations were ongoing and that force majeure agreements were possible. The result was predictable: some of the companies subject to the CBAM lost access to exports to the EU.

The company proposes considering support mechanisms similar to those used in France: indirect subsidies for the cost of electricity for industrial consumers through tax instruments or hidden subsidies based on nuclear power generation. Such support is necessary not only for the ferroalloy industry but also for steel industry, machine building, and the agricultural sector.

Conclusions

The company plans to adhere to its production plan through the end of 2026 under existing annual contracts. Future prospects depend on resolving the issue of electricity costs and the stability of the operating environment.