Ukraine's Mariupol steel plants in critical state after gas cut-off

12 June 2015

Two of Ukraine's largest steel plants are in a critical situation and may have to cut production, owner Metinvest said on Friday, after fighting in the separatist east severed gas supplies to the port city of Mariupol and two other towns.

Mariupol, a southeastern government-controlled city on the Sea of Azov, lies close to the frontline with rebel territories and is home to Metinvest's Ilyich and Azov Steel plants, which together employ 10 percent of Mariupol's population.

Gas transport monopoly Ukrtransgaz said on Friday that fighting between government troops and pro-Russian rebels had damaged a gas pipeline, leaving three towns, including Mariupol, without gas supplies for up to two days.

"The situation is critical. We are considering temporarily idling blast furnaces and also limiting steelmaking and rolling production operations," Metinvest said in a statement.

Prime Minister Arseny Yatseniuk blamed Russian-backed separatists for the attack on the pipeline, accusing them of trying to destabilise Mariupol.

"They're doing this on purpose to sow panic in Mariupol, to shut down the factories so that people don't get wages. It's part of the Russian plan," he said in a government meeting.

The strategic industrial hub has been under threat from rebel attacks for months despite a much-violated ceasefire deal. Control of the city would help the rebels form a corridor to the Crimea peninsula which Russia annexed from Ukraine last year.

Production has fallen significantly at both plants since fighting erupted last April, but have kept working despite severe supply disruptions.

Output at Ilyich, which is producing around half as much steel as before the conflict, was 1.1 million tonnes in the first four months of 2015, while Azov Steel produced 590,000 tonnes in the first quarter of this year.

Overall, steel production in Ukraine fell by 28 percent to 9.247 million tonnes in the first five months of 2015 compared with the same period last year, producers' union Metalurgprom said earlier this month.

Steel, chemical and agricultural goods make up the majority of Ukrainian exports.