Ukrainian mining and steel producing group Metinvest has announced that it has resumed shipment of raw materials to Ilyich Iron and Steel Works of Mariupol and Azovstal via seaports because of the low throughput capacity of the Kamysh-Zarya-Volnovakha railway, the only rail road connecting Mariupol to the rest of Ukraine.
According to Metinvest, the constrained throughput capacity of the railway section does not allow the increase of capacity utilization at Mariupol metallurgical plants for production of the planned 19,500 mt per day. Instead of the required 16 cargo trains per day, Ukrainian Railways (Ukrzaliznytsya) managed only 13 due to the shortage of locomotives and inefficient operation of the railway. Accordingly, Metinvest has decided to renew the practice of coastal shipping of raw materials that was stopped in November 2015. In the coming months, it is planned to transport approximately 200 million mt of iron ore concentrate to Mariupol ports via Berdyansk port.
Metinvest also stated that the alternative route is a forced measure leading to a significant escalation of cost of raw material supply ($8-15/mt) and, as a result, the increased cost of iron. Additional logistical expenses bring the variable costs of the metallurgical plants to steel sales prices, while currently the steelmakers do not see another solution in the current situation.