Shufani: Soaring gas prices and stronger hryvnia reflect negatively on Ukrainian machine building

Natural gas price hikes have a negative impact on the Ukrainian machine-building industry. Daniil Shufani, the owner of Variant Agro Build company, explains that this is associated with the rise in the price of metal, as well as the higher cost of hot-dip galvanization. Furthermore, the cost of production facilities and offices heating is also rising.

"We have suffered a double impact since in addition to the increase in gas prices, the exchange rate has fallen. In other words, the cost of production is growing, but we cannot compensate for the price rise by means of foreign exchange earnings because our products have become uncompetitive on the foreign market," reasons Daniil Shufani.

According to him, since late last summer, the metal prices have increased by 120%, but recently they have slipped by 20-25% of the peak value. The cost of equipment produced by Variant Agro Build, including irrigation equipment (TM Variant Irrigation), surged by 15-20% in October. While the cost of similar imported equipment has not changed. Consequently, this curbs the demand for Ukrainian machinery both in the domestic and foreign markets.

"Today, we sell the lion's share of equipment to zero, earning practically nothing, just so we don't suspend the business and lose specialists. This is the way to survive, not to develop," Daniil Shufani comments.

Consumers, alongside the economic factor, are also subject to a psychological factor. Enterprises are cautious about investing in modernization, saving money for a "rainy day," being uncertain about the future.

"The government does nothing to settle the situation. On the contrary, instead of allowing controlled inflation to support exporters, they are strengthening the hryvnia," says Daniil Shufani. "This strategy will have devastating consequences for the country's economy."

The owner of Variant Agro Build adds that if before the hot dip galvanization shop maintenance cost the company UAH 400-450 thou., today it costs UAH 1.5 mln per month. Moreover, the cost of heating for industrial and office premises in winter will increase threefold.

Daniil Shufani adds that the company was notified by Kharkivoblenergo and Kharkivoblgaz about the upcoming rolling blackouts of electricity and gas supply. Thus, in addition to the cost, there is also an urgent issue of electricity and gas availability for the enterprise.

For context, a number of enterprises in Ukraine are forced to halt the production for inflated prices of natural gas both in the international and domestic markets.