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Ukraine Mining-Metal Sector on Verge of Bankruptcy

Devaluation of Ukraine's currency is one of the only things keeping the country's mining and metal sectors afloat

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April 17, (Interfax Ukraine) - The majority of mining and metal companies in Ukraine have been on the verge of bankruptcy since 2014, which they managed to avoid only thanks to the devaluation of the national currency and the improved competitiveness of Ukrainian products on foreign markets, Metinvest CEO Yuriy Ryzhenkov said at the National Export Forum in Kyiv on Thursday.

He said that last year was the most difficult year for the Ukrainian steel market. Exports of rolled steel (without pipes) from Ukraine fell by 13%, to 20.3 million tonnes. The rolled steel domestic market narrowed by 22%, to 5.6 million tonnes, and this year it will reach the worst level since Ukraine's independence, which is linked to the downward pace of the key sectors that consume metal products.

<figcaption>Tough times ahead for Ukraine's miners</figcaption>
Tough times ahead for Ukraine's miners

In addition, the situation on global markets has worsened: since early 2014 the price of Ukrainian hot roll fell by 30%, the prices of iron ore fell by 2.7 times and reached $50 per tonne, putting most of Ukrainian mining companies on the verge of profitability.

"Instead of tax support of the sector in the crisis period the state increased royalty rates by six or seven times [in hryvnias] compared to the first quarter of 2014," Ryzhenkov said.

He said that due to low volumes and the situation with prices, the net loss of metal companies in January-September 2014 soared by 3.1 times. With no access to foreign financing most of the metal and mining companies are on the verge of bankruptcy, which entails the risk of mass unemployment and the loss of taxes and currency income by the state.

Ryzhenkov pointed out what he believes to be the top-priority tasks in relation to the authorities and mining and metal companies.

"These are the predicted long-term strategy of the National Bank of Ukraine (NBU), which will balance the capital market and liquidity of exporters, the transparent fiscal policy of the state, the common rules for all players, the clear observation of Ukrainian law, the restoration of infrastructure destroyed due to hostilities, first of all, this concern railway communications, without which the sector companies will not be able to restore production chains and start stable shipments," he said.

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