Ukrainian steelmakers suffer as natural gas prices boom, but Russian metals companies unscathed

European and Turkish steel mills have raised concerns this month over elevated electricity and gas costs, with Spanish and Italian power prices at all-time highs. The rising costs have now become an issue in Ukraine, too.

A spokeswoman for Ukrainian steel pipe producer Interpipe told S&P Global Platts that steel scrap has traditionally been the main cost item in the company's production value, but recently, natural gas has started to have a bigger effect than high scrap prices. Interpipe uses natural gas mainly in rotary furnaces and heat-treating lines.

Gas prices in Ukraine began to climb in April this year, and in August and September they soared to record levels, she said, adding that the increase was affecting all its products, forcing the company to pass those costs on to consumers.

In 2012-13, Interpipe commissioned a 1.3 million mt/year electric arc furnace-based (EAF) steelmaking and billet casting complex at Inetrpipe Steel in Dnepropetrovsk, central Ukraine, which replaced outdated and energy-intensive open-hearth production, decreasing the company's gas consumption by over 80%.

A source close to ArcelorMittal Kryviy Rih also confirmed that gas prices were becoming an issue for the steelmaker but ruled out production stoppages.