The price of electricity has brought the largest metallurgical plant to Ukraine

The largest metallurgical plant in Ukraine was on the verge of shutdown due to the highest electricity prices in Europe. The assistance of the parent company in hundreds of millions of dollars cannot last forever, said the management of ArcelorMittal Krivoy Rog.

"The challenges of wartime have led to a significant increase in the cost of production and unprofitable activities over the past three years. In 2022-2023, the main reason for the losses were logistical problems and blocking access to our traditional markets through the Black Sea ports. But since 2024, the issues of availability and cost of electricity have come to the fore," Pavel Zadorozhny, Chief Financial Officer of ArcelorMittal Krivoy Rog, writes in NV Business.

He noted that since 2021, the price of electricity for industry in the country has approximately doubled.

"For example, in May, the cost of electricity for AMKR exceeded 94 euros per MWh, while in France, where a significant proportion of electricity is also produced by nuclear power plants, the market price of electricity was at about 20 euros," Pavel Zadorozhny said.

In his opinion, there are two reasons for this situation: the monopoly position of Energoatom and restrictions on the import of electricity.

"In other words, there is no truly competitive electricity market in the country, which leads to unreasonably high prices. In particular, due to high energy prices in November 2024 - March 2025, we were forced to shut down one of our two blast furnaces in order to minimize our losses. In anticipation of the normalization of energy costs after the end of the winter period, we resumed work with two blast furnaces at the end of March and hoped to achieve positive profitability in the second quarter. But at current energy prices, we risk remaining unprofitable for the fourth year in a row, because we can't just take and shift these costs to our customers, because the market sets the prices for our products," writes a representative of the largest metallurgical plant in Ukraine.

He cites data that Energoatom and Ukrhydroenergo showed significant operating profit in 2024, while the plant actually survives only thanks to the financial support of the parent company, which over the past three years has amounted to more than $ 1 billion.

"But it would be wrong to hope that such support can last indefinitely, since any business should be inherently profitable. An unprofitable business cannot last long. Some enterprises of the industry, in particular in Krivoy Rog, have already curtailed their activities due to the high cost of electricity. This is a very dangerous trend. If we want the Ukrainian economy and our largest industrial enterprise to survive, Ukraine must have a market and competitive price for electricity, which will allow us to produce competitive products. Enterprises operating in wartime conditions and incurring losses are already too exhausted to bear the burden of inflated energy prices," writes Pavel Zadorozhny.

He warned that with such a cost of energy resources, the company will not be able to exist profitably and will also be forced to curtail its activities.

"And since this is, in fact, a city—forming enterprise, it can have serious humanitarian and social consequences for the city: the work of more than 18 thousand employees will be at risk, more than 50 thousand of their family members may be left without a source of income," added the financial director of ArcelorMittal Krivoy Rog. He cited data that Krivoy Rog may be left without a third of budget revenues, while the whole of Ukraine is without annual foreign exchange earnings of $ 1 billion.