ArcelorMittal to Shut Down Production Unit in Ukraine Amid Challenges

Impact of Economic and Environmental Factors on Steel Production

KYIV, Jan 26 (Reuters) - ArcelorMittal Kryvyi Rih, Ukraine's largest steelmaker, will close one of its production units in the second quarter, it said on Monday, citing EU environmental policy and high local power prices caused by Russian attacks on energy infrastructure. 

Closure of the Blooming Mill

The plant, located in south-eastern Ukraine approximately 70 km (43.5 miles) from the front line, is to close its blooming mill, which produces billets for the enterprise's small-gauge and wire mills.

Challenges from EU Policies

The company said the European Union's introduction of the Carbon Border Adjustment Mechanism from January 1 effectively closed the market to a significant portion of Ukrainian metallurgical products.

Effects of Russian Attacks on Energy Supply

The CBAM is the EU's tool to put a fair price on carbon emitted during the production of carbon-intensive goods entering the bloc.

ArcelorMittal Kryvyi Rih said that the extremely high cost of electricity in Ukraine was a significant additional factor which worsened the economic feasibility of the unit.

Russia has sharply increased the intensity and scale of its attacks on Ukraine's energy sector, causing blackouts across entire regions and constant restrictions on electricity supplies to industry.

The government has encouraged enterprises to import more expensive electricity from the EU, increasing production costs and making exports uncompetitive.

Earlier this month, Ferrexpo, a leading European supplier of premium iron ore pellets necessary for steel production, said it had halted mining operations in Ukraine and furloughed part of its workforce, also pointing to electricity supply disruptions.

(Reporting by Pavel Polityuk; Editing by Kirsten Donovan)