Operations of Ilyich and DMKD hit by reduced gas supplies

Thursday, 10 June 2010 14:28:13 (GMT+2)

Ukraine's national energy company Naftogaz has started from yesterday to limit gas supplies to the most indebted domestic steel producers, i.e., to Ilyich Iron and Steel Works of Mariupol (Ilyich) and Dneprovsky Iron and Steel Works named after F. Dzerzhinsky (DMKD), a subsidiary of Ukrainian steel producer Industrial Union of Donbass (ISD), which owe it UAH 300 million (about $37.9 million) and UAH 192 million (about $24.3 million) respectively for gas supplies.
 
According to local media reports, the gas pressure for Ilyich was reduced by 1.8 times to three atmospheres from the normal rate of 5.4 atmospheres, leading to a decrease of pig iron production and a reduction in output of steel products. Further reduction of gas pressure may cause the stoppage of the steelmaking units, a company representative said, adding that, currently, Ilyich is not able to repay its gas supply debts, due to the lack of working capital, as the government still owes it VAT refunds which amount to about UAH 1.5 billion (approx. $189.5 million).

Meanwhile, the gas pressure for ISD's DMKD has been reduced to one third of what it was, forcing the plant to switch all its three operating blast furnaces to gas-free mode.

Ukraine's Ministry of Fuel and Energy said that such strict measures are explained by the need to ensure balanced finances of Naftogaz, which also threatens to fully cut gas supplies to Ilyich, DMKD and other indebted companies. Gas supplies may also soon be cut for Alchevsk Iron and Steel Works, another subsidiary of ISD.

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