How much Ukrainian business will save from reduction of Russian gas price

Production costs for metallurgical plants in Ukraine will edge down by $12-13 per ton of finished product, says an expert of Ukrpromvneshekspertiza state agency.

Currently the gate price for natural gas is about $450 per thousand cubic meters, but if Ukraine acquires Russian gas at $268.5 per thousand cubic meters, the gate prices will fall to $300 per thousand cubic meters, explained Oleg Gnitetsky in an interview to UNIAN news agency.

According to the expert, in the long run lower gas prices will benefit all metal manufacturers. But the greatest benefit will be for those who do not have pulverized coal injection (PCI) units and are forced to use larger volumes of expensive gas and expensive coke.

"Yes, such gas price cut will reduce production costs on plants without PCI technology by about $12-13 per ton. In the context of the current low prices and strong competition in the foreign markets, this is a good help to strengthen the position and boost the sales through more attractive and competitive price offers," said the expert.

The enterprises that have installed the PCI technology (Donetskstal, Alchevsk Steel, Mariupol Illich’s Iron and Steel, Zaporozhstal) use less natural gas; in this case, the specified gas prices cut will reduce production costs by about $3-4 per ton.

In 2012 Ukrainian metallurgical enterprises reduced natural gas consumption by 24.9% (1.287 billion cubic meters) compared to 2011 (up to 3.886 billion cubic meters).

Established in 1993, Ukrpromvneshekspertiza State Enterprise is the leading domestic company in the field of marketing and expertise of foreign trade contracts. The company specializes in industrial consulting, analytical studies, business plans, feasibility studies and investment memorandums, price research.

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