Chemical factories Stirol and Azot, based in Ukraine’s two eastern oblasts where Kremlin-backed separatist violence is high, on May 8 announced that they would temporarily suspend production until the situatlon settles down.
In 2013, these plants together produced 1.5 million tons of ammonia, a key component in nitrogen fertilizer, or 44 percent of Ukraine’s total, according to ukrchem.dp.ua. Chemical exports are worth $4.3 billion annually to Ukraine and make up 6.8% of merchandise exports.
Stirol employs more than 4,000 workers in Donetsk Oblast’s Horlivka, seized by the armed rebellion, while Azot has around 8,000 of staff in Severodonetsk, Luhansk Oblast. Workers will still be receiving salaries and no one will be laid off, says the official statement of the parent company Group DF.
Businessman Dmytro Firtash’s Group DF, which owns both companies through its Austria-registered Ostchem, stated that the factories were “suspending production of ammonia and its derivatives in order to ensure the safety of businesses and residents of the regions where there is an uneasy situation.”
Firtash is currently in Austria awaiting extradition to the U.S. on charges in bribery after his March 12 arrest in Vienna.
He says in the Group DF statement that he has no plans to cut output or curtail investments in facilities. “We will carry out reconstruction no matter what will be the situation in the country or what will happen financially.”
Industry analysts say that the suspension should not affect domestic agriculture, which is in the throes of seeding what might be a record crop this year, even though Stirol dominates the local nitrogen fertilizer markets. However, receipts from exports should take a hit.
Analyst Dmytro Churin of Eavex Capital says, “In our opinion, the measures adopted at these enterprises are temporary and will not affect the agricultural sector. At the same time, reducing production of ammonia and its derivatives in the whole country will have a negative impact on the export of these products.”
The nation’s chemical industry is already suffering hardships, with first quarter output down by 21 percent, while last year’s total dropped by 24 percent to 3.4 billion tons.
Concern Stirol reported $225 million of net losses in 2013, which is 21.4 percent less than the previous year, while Azot decreased its losses last year by 16 percent – to $240 million.
The main production arms of Concern Stirol and Severodonetsk Azot are ammonia, nitrogen fertilizer, plastics, polymers, and paints.
Kyiv Post staff writer Evan Ostryzniuk can be reached at [email protected].
