19 September 2016
Metinvest Group’s CEO, Yuriy Ryzhenkov highlighted the importance of steel industry sector for the development of the economy of Ukraine at the 13th Yalta European Strategy (YES) Annual Meeting. According to Mr. Ryzhenkov, other industries in Ukraine, such as machine building, energy, transport and agriculture can only develop on the basis of steel industry. Even in the period of the armed conflict in Eastern Ukraine, Metinvest remained one of major taxpayers, and its investments in modernization were the largest, environmental projects being the first priority.
“Our company has survived two challenging years. The challenge was not only related to the military activities, infrastructure and the tariff policies. We were hit by the world steel overproduction crisis. Nevertheless, we continued to invest. Metinvest’s investment annually comprised USD 250-270 million. Our strategic projects included the ones to tackle production efficiency improvement and environmental issues. Namely, the largest environmental project at Ilyich Iron and Steel Works of Mariupol (MMKI), where a new sinter plant construction is in progress along with gas cleaning facilities reconstruction. This year we will commence the development projects: we have recently signed a supply contract for the continuous casting machine to be installed at MMKI; we continued construction of pulverized coal injection (PCI) plant at Azovstal; we stopped Basic Oxygen Furnace No. 2 at MMKI for a major overhaul, which will allow meeting European environmental standards. These projects are worth almost USD 300 million,” said Yuriy Ryzhenkov.
In opinion of Metinvest Group’s CEO, in order to develop mining and metals sector of Ukraine successfully, three challenges have to be resolved: First, there is an acute need in adequate, clear and predictable rules for setting the subsoil tax and state monopoly tariffs. He highlighted that Ukraine had the highest harbour duties in the world, continuously growing railway tariffs, and high cost of gas transportation. “The state authorities that make decisions on the tariff setting, should benchmark them against the tariffs in other countries in order not to deteriorate the competitiveness of the goods made in Ukraine in the world markets,” stated Yuriy Ryzhenkov.
Second, there is a need for fair conditions for Ukrainian product sales in the markets of the European Union. “The market of the EU has always been and remains a home market for us. Our key accounts reside there, and approximately 40% of all Metinvest sales are generated in Europe,” stated the Chief Executive Officer of Metinvest Group. At the same time, in July 2016, the European Commission initiated an anti-dumping investigation on the imports of hot rolled steel products from Ukraine and a number of other countries to Europe. Yuriy Ryzhenkov noted that Ukraine had been a traditional and responsible supplier of hot rolled steel products to the EU, while the anti-dumping investigation was pursued not to the extent of an economic dimension, but rather of a political dimension. “Therefore, the topic should be reviewed at the interstate level. Domestic steel makers hope that the investigation will end without application of the anti-dumping measures against Ukraine – pursuant to the spirit of the Free Trade Agreement between Ukraine and the EU, and the WTO rules,” added Metinvest’s CEO.
Yuriy Ryzhenkov called the lack of access to the European capital markets the third challenge on the way of development of domestic mining and metals sector. As it is known, today Ukrainian companies have difficulties in raising large loans in Europe, even large businesses. At the same time, Metinvest Group not only exports a significant portion of its products to the EU, it also owns companies there, enters into multi-million contracts for the supply of equipment made by European companies to modernize its production assets in Ukraine. “In essence, we are a European company in a broad sense of this term, and we would like to have access to the financial resources that would help us develop further,” stated Yuriy Ryzhenkov in his speech.
In the course of the Q&A session that followed the panel discussion, the second President of Ukraine, Leonid Kuchma brought Metinvest Group as an example for other Ukrainian companies. He stated that even in such challenging times Metinvest continued investing into its enterprises, and emphasized the Group’s investments in Mariupol’s I&SWs.
In the course of the briefing, the CEO of Metinvest commented on the adoption of the law about increasing scrap export duties from EUR 10 to EUR 30 per tonne of scrap for the period of one year, the law that the President of Ukraine, Petro Poroshenko signed last week. “This is a temporary patch that allows stabilizing the situation today. For the long-term, we would like to see the scrap market deregulated completely. This means that the taxation of scrap-related operations should be simplified along with simplification of settlements for scrap collection. Consequently, amendments are required to both the documents of the National Bank of Ukraine and the Tax Code,” noted Yuriy Ryzhenkov. According to Mr. Ryzhenkov, not only steel makers, but also scrap collectors are interested in the reform of the scrap market.
Metinvest’s Chief Executive Officer spoke on 17 September at Building a New Economy panel discussion at the13th YES Annual Meeting. Other panel discussion participants were Boris Lozhkin, the Secretary of the National Investment Council of Ukraine, Dmitro Shimkiv, Deputy Chairman of the President’s Office Administration, and Ian Taylor, the President of Vitol Group.