【Ferro-alloys.com】: Currently, companies are operating at a loss, and the prospects for profitability seem distant

Ukrainian ferroalloy companies are gradually increasing production, although the industry’s mining capacity remains idle. The main constraints remain the risks of operating in proximity to the front line and the high cost of electricity.

Current results
The industry resumed operations in April-May last year and is trying to increase production as much as possible. In the first half of this year, Ukrainian ferroalloy companies increased their output to 151,200 tons. Specifically, production grew as follows in January-June:

silicomanganese – to 69,700 tons;
ferromanganese – to 81,500 tons;
At the current cost of electricity, production is still heavily loss-making – $300-500 per tonne of product. With higher production capacity utilisation or higher prices on the world market, production could possibly break even. Thus, the prospects for profitability seem quite remote.

Photo – What is the situation in Ukraine’s ferroalloy industry in 1H2025?Despite the difficult conditions, enterprises continue to operate for several reasons: fulfillment of signed contracts, participation of electric furnaces in regulating the Ukrainian power system, and fulfillment of social functions. Few would dare to shut down an enterprise in the frontline zone, which would mean laying off people and stopping the payment of local taxes. Many people remain living practically on the front line simply because they have jobs and nowhere else to go.

Product exports
The industry has begun to gradually resume exports. In the first half of the year, exports of ferroalloys increased 2.3 times, to 54,800 tons, compared to 24,200 tons in the same period of 2024. The largest volumes of exports went to Poland (28.4% of shipments in monetary terms), Algeria (25.8%), and Turkey (23.2%). In financial terms, exports increased 2.1 times to $61.1 million.

The extension of preferential trade with the EU for steel products will have a positive impact on exports. In addition, Ukrainian export products are not covered by the European investigation into imports of certain types of ferroalloys. The reason for this investigation was the uncontrolled growth of ferroalloy imports from Kazakhstan, as well as Russian products entering the European market under the guise of Turkish and Indian products.

Energy issue
Manufacturing enterprises in the industry are optimizing their energy consumption and developing alternative sources of electricity. For example, factories try to use “state” electricity to operate electric furnaces, and direct the electricity generated by their own gas generation to other needs. Companies are also looking for ways to reduce the cost of electricity by installing solar power plants and using ferroalloy gas.

In terms of reducing the cost of electricity, we are hoping for changes in government economic stimulus programs that will provide tax breaks or preferences, for example, for frontline territories. In this context, lower electricity prices or discounts depending on consumption volumes are important to us. Our enterprises are not only energy-intensive industries, but also an important link in regulating consumption levels throughout the Ukrainian energy system. To a certain extent, the Nikopol Ferroalloy Plant (NFP) is at a “dead end” in the Ukrainian energy system. However, negotiations on preferential prices or other forms of support for frontline territories have not yet yielded results.

The situation with raw materials
Currently, ferroalloy enterprises are most likely operating exclusively on Ukrainian raw materials. Last year, the plants imported a small amount of ore (84,300 tons from Ghana), but in the first half of this year, there were no imports.

Currently, the Pokrovsky (PGOK) and Marganets (MGOK) mining and processing plants are idle and are practically not mining, but enrichment at sinter plants continues, as fairly large reserves of manganese ore were accumulated before the war.

This allows ferroalloy enterprises, which are operating at low capacity, to gradually process these reserves. How long the accumulated reserves will last depends on the capacity utilization of the plants; if they continue to operate at the current rate, the reserves may last for six months to a year. If the enterprises had higher capacity utilization, the reserves would already be insufficient.

There are still some positives. To cover current production needs, MGOK will supply NZF with manganese ore worth UAH 422 million. The sintering plant at PGOK produced 22,900 tons of manganese concentrate.

Plans and hopes
The main task for the industry now is to hold out. Thanks to the work of solar power plants in clear weather, there is still enough electricity. We definitely plan to continue production until November. If there are any developments regarding a suspension or complete cessation of hostilities, enterprises will be able to slightly increase production volumes.

Perhaps, as part of European integration, Ukraine will gain access to EU funds for the modernization of industrial production as a candidate country for accession. These funds would be very useful to us.

Manganese ore is among the top items on the list of critical minerals in the resource agreement between Ukraine and the US. In addition, we very much hope that our officials will finally understand that domestic production of ferroalloys is a huge advantage for the development of domestic steel sector and the production of a number of types of defense products. Otherwise, the development of steel industry and, for example, the production of armored vehicles and machine-building products will depend on imports of ferroalloys. This is not only a loss from the outflow of currency from the country, but also a question of the rapid availability of the necessary range of ferroalloys.

• [Editor:Alakay]