Stable Electricity Prices Crucial for Ukraine’s Steel and Mining Industry

The Need for Stable and Realistic Electricity Prices in Ukraine

ArcelorMittal Kryvyi Rih CEO Mauro Longobardo emphasized the need for stable and realistic electricity prices to support Ukraine’s steel and mining industries. According to Longobardo, introducing a price cap for energy-intensive industries and creating long-term contracts with fixed rates could stabilize the sector. This proposal aims to provide predictability for investors and businesses in Ukraine, especially in light of the ongoing challenges posed by the war and fluctuating energy costs.

ArcelorMittal Kryvyi Rih is operating at a loss, with over $1 billion in support from its parent company. Longobardo highlighted that these losses are primarily driven by the sharp rise in electricity tariffs, which have tripled the share of electricity costs in the company’s product prices. For much of 2023, Ukraine’s electricity prices were the highest in Europe, undermining the profitability of steel production.

Key Measures Proposed to Address Energy Issues

To mitigate the adverse effects of skyrocketing electricity prices, ArcelorMittal Kryvyi Rih proposed several measures to the Ukrainian government. The first proposal is to introduce a price cap for energy-intensive industries. Longobardo also suggested adopting regulatory mechanisms that would increase competition among state-owned energy producers, similar to the French model. Lastly, he called for the development of long-term contracts with fixed rates to provide more stability for energy consumers.

These steps would create more competitive pricing and allow businesses to plan their operations with greater predictability. As Longobardo pointed out, the inability to forecast energy prices or understand the energy system balance is a significant problem affecting the entire Ukrainian industry. Without such reforms, many companies will continue to face operational difficulties, limiting the country’s economic recovery and growth.

Challenges Facing ArcelorMittal Kryvyi Rih and Ukrainian Industry

In addition to the high energy costs, other issues like rising rail freight tariffs are also impacting ArcelorMittal Kryvyi Rih’s operations. These tariffs, if indexed, would shift the losses of Ukrainian Railways onto companies like ArcelorMittal. The company believes that state-owned carriers should receive government support to prevent these costs from negatively affecting shippers. Overall, these combined factors are creating an unstable environment for Ukraine’s industrial sector, which is crucial for the nation’s recovery.

SuperMetalPrice Commentary:

The current energy situation in Ukraine reflects the broader challenges faced by energy-intensive industries worldwide. For steelmakers like ArcelorMittal Kryvyi Rih, high electricity costs and unpredictable tariffs are crippling production capabilities. The proposed reforms—price caps, competitive energy markets, and long-term contracts—could provide a lifeline to Ukraine’s steel and mining sectors, facilitating long-term growth and stability. As global markets recover, countries with predictable energy prices will have a distinct competitive advantage in the metal production industry.