OREANDA-NEWS. June 10, 2010. Naftogaz of Ukraine started to cut gas supplies yesterday to those steelmakers that have accumulated the biggest debts in gas payments. In particular, gas supplies have been cut by threefold for Dniprovskyi Steelworks <DMKD UK N/R> (UAH 192mn in debt), which was forced to transfer pass its blast furnaces operations to an off-gas mode. The second in the list was Mariupol Illich Steelworks <MMKI UK U/R> (with gas debts at UAH 300mn), gas supplies being reduced by almost two times and, as a result, their pig iron output dropped accordingly. the Ministry of Fuel and Energy has announced that the next in the line for gas cut offs was to be Alchevsk Steelworks <ALMK UK U/R>.

Millennium Capital: all the companies listed above have problems with the working capital, although for different reasons. MMKI accounts for their problems by the Government debts in VAT refunding (about UAH 1.5bn). The other two steelworks belong to Industrial Union of Donbass (IUD), which means that, with the new investors on board, IUD was apparently unable to cope with its finance problems. One way or another, the gas supply cut offs may result in significant losses for the steelmakers, and not only because of penalties for failure to perform the effective contracts and losing their share of the markets, but also due to additional costs of re-launching the production process in the extinguished furnaces.