Ukraine: Ferro alloys production falls over 50% in CY'23, outlook uncertain

In 2023, Ukrainian ferroalloy manufacturers experienced a significant reduction in production by 57% in comparison to the previous year, as stated by Sergiy Kudryavtsev, the Executive Director of the Ukrainian Ferroalloy Association (UkrFA), during a conversation with the Ministry of Industry.

This significant downturn was largely attributed to various factors including heightened military activity, the devaluation of ferroalloys, and logistics-related challenges.

In 2023, Ukraine's ferroalloy exports experienced a 4.9% decrease compared to 2022, Poland was the leading consumer of Ukrainian ferroalloys in 2023, accounting for 52.8% of the total exports in monetary terms. Turkey and the Netherlands followed, accounting for 14.1% and 8.5% of export shipments respectively.

Notable reasons for reduced production

Complete industrial closures: Three major industries, namely the Nikopol Ferroalloy Plant( 950,000 t capacity), Zaporizhzhia Ferroalloy Plant (347,000 t capacity), and Marhanets Mining and Processing Plant mines 7,000 t of manganese ore, underwent full closure in November 2023. A major reason behind these closures was the steep rise in electricity transmission tariffs which, in turn, escalated the cost of production and undermined profitability.

Issues in procurement of skilled manpower: Concerns related to manpower owing to the flawed system of reservations for mobilization, particularly for the specialists handling primary production equipment has also contributed to the diminished production of ferro alloys in Ukraine.

The Executive Director of UkrFA urged the government to intervene and take necessary measures to revive the industry's operations. He emphasized the need for improved logistics and regulation of worker reservations, citing these as more critical than the government's influence on tariff regulations.

Outlook

The future of Ukraine's ferroalloy industry in 2024 hinges on three critical factors: the ongoing military conflict, logistics, and electricity. Kudryavtsev concluded that unless these matters are resolved, it is unlikely that the plants will be able to restart operations.