Ukraine's natural gas-dependent steel making industry faces huge obstacles as the energy crisis deepens. Illich Iron and Steel Works, a Mariupol-based steel producer, is preparing to shut down as the amount of gas in the storage hit a critically low level.
This is a direct result of company’s debts.
The plant “is on the brink of having to shut down due to a halt of natural gas supplies by the gas companies,” Illich’s chief executive officer Yuriy Zinchenko wrote on Facebook late at night on Feb. 7.
“During Feb. 6-7, pressure of natural gas was lowered to critically low indicators. As of 12 p.m. Feb. 7, gas pressure … was 15 percent below the norm. Full stop of gas supplies, according to the information received by the plant, may occur Feb. 9.”
Zinchenko claims that government owes Illich twice what it owes for the gas supplies. It hasn’t reimbursed the value added tax, a fiscal instrument that is supposed to be paid back if the goods are being exported.
Hard times came to Mariupol as war against the Russia-backed insurgents goes on. On Jan. 24, when the city was shelled by the Kremlin-backed insurgents, 30 civilians were killed and many wounded. After Donetsk and Luhansk, which are currently occupied by the separatist troops, Mariupol is the third most strategically important city in the Donbas region.
Illich plant, founded in 1897, is a publicly traded company that is a part of Metinvest, a steel holding belonging to the nation’s richest man Rinat Akhmetov and Vadym Novinsky, a former Russian who was granted Ukrainian citizenship by an ex-President Viktor Yanukovych.
Price of the shares of Illich, an employer of up to 30,000 people, has been very volatile lately. It lost 20 percent of its value in past 12 months.
Azovstal, another steel plant in Mariupol that belongs to Metinvest, is about to stop too, Zinchenko claims. Jan. 24 shelling led to substantial damages, some of the staff got killed, according to Azovstal head Enver Zkitishvili.
Tbe steel industry is a basis of the local economy and its exporting activity. It remains mostly unmodernized and uses obsolete equipment. However, it is something that Ukraine is known for on the global market.
Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].
