Electricity shortage in Ukraine disrupts production at Ferrexpo

The iron ore group Ferrexpo, headquartered in Switzerland, controlled by Konstantin Zhevago, owns assets in Ukraine. Moreover, the main asset of this Group is the Poltava Mining and Processing Plant, which specializes in the production of iron ore pellets, supplying its products mainly to metallurgical plants in Eastern Europe.

The current forecast for iron ore pellet production in December will be reduced by 140 thousand tonnes compared to previous estimates of the Group's iron ore production, due to restrictions on electricity consumption during peak loads. However, due to the devaluation of the hryvnia, the cost of pellet production has decreased, so the company's position remains stable. In addition, thanks to the new compressor equipment , throughout 2014 Ferrexpo significantly increased the production of iron ore, which allowed by the end of the year, go "plus" ..

The decline in production at Ferrexpo is one of the manifestations of the lack of electricity in Ukraine, affecting production and the lives of citizens in the country. Although previously Ukraine independently provided coal supplies to thermal power plants, now the situation has completely changed. Events in the Luhansk and Donetsk regions led to a halt in coal supplies from more than half of the country's coal mines. At the same time, the separatist regions are simply inundated with high-quality coal, when the rest of Ukraine is experiencing an acute shortage of it due to the lack of agreements between the warring parties.

About 10 percent of electricity generation in the country has been discontinued due to the lack of coal reserves at the CHP plant. If this situation continues in the first quarter of 2015, then for the company this will lead to a decrease in cellular sales in the market. In this case, Ferrexpo plans to increase its production of premium pellets, giving preference to long-term contracts.

The Ukrainian government has given permission to industries and business groups to independently provide food for production. The company has already held meetings with electricity suppliers in order to improve the situation.