Steelworks to slash prices in bid to survive

KVV Liepajas Metalurgs, a steelworks company based in the south-western Latvian port city of Liepaja, and traditionally a major employer in the town is to reduce the cost price of its products, the company said Thursday.

The company will seek to improve energy efficiency, reduce energy consumption and increase productivity, the BNS newswire reported.

Direct supply contracts and the work with immediate end-users of the products is one of the preconditions for bringing down the cost price and improving the plant’s profitability, KVV LM said.

"The increase of the mandatory purchase component [MPC or a component of the electricity price supporting production of renewable energy] and the subsequent rise in the overall energy cost has had a serious impact on the competitiveness of the Latvian economy therefore we are grateful to the government for the regulations adopted on July 14 this year that would enable energy-intensive companies, including KVV LM, to reduce their electricity bills,” said the company’s board member, Igor Talanov.

He voiced hopes for further support from the Latvian government, including lowering of electricity, natural gas and railway tariffs, possible granting of tax holidays and the work towards mandatory certification of construction materials in Latvia.  

In view of the ongoing negotiations on the EU-US free trade agreement, KVV LM expects the Latvian government to urge the European Commission to remove possible barriers that might put the Latvian companies exporting their products to the US at a disadvantage compared to many other market players.

At the meeting of the Coordination Council for Large and Strategic Investment Projects on August 19, the Latvian Investment and Development Agency (LIAA) was instructed to identify possible forms of the government aid to development of KVV LM. Yevgeny Kazmin, a shareholder of Ukraine’s KVV Group, the parent company of KVV LM, called for increased cooperation between KVV, investors and the Latvian government.

The steel plant based in the Liepaja town in south-western Latvia was officially re-opened in a ceremony on March 6, 2015. The new owners soon re-opened the rolling mill and the steel melting shop and also hired more staff. But in mid-May they announced that they felt forced to cut production at the steel melting shop and lay off some of the freshly hired staff because the cost price was too high to make its products competitive on the global market. In particular, the company complained about the high cost of electricity.

The agreement about selling the production plant of the insolvent Liepajas Metalurgs based in Latvia’s south-western port city of Liepaja to Ukraine’s KVV Group was signed on October 2, 2014. The Ukrainian company will pay 107 million euros for Liepajas Metalurgs in several installments over the next 10 years. 

In 2013, Liepajas Metalurgs was declared insolvent. The company ran into financial troubles and had to cease production in spring 2013 due to a shortage of working capital.

Liepajas Metalurgs could not repay a state-guaranteed loan it had taken from Italian bank UniCredit, and the loan was repaid by the Latvian state.

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