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19:20 PM Sunday, February 26, 2017
Industry
Fighting in Avdiyivka Endangers Civilians, Threatens Ukraine’s Economy
Adrian Bonenberger
Russia-supplied separatists threaten Ukraine's key coking plant, force evacuation of up to 20,000 civilians
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KYIV – Heavy fighting along Ukraine’s de facto border with territory held by Russian-backed separatists has disrupted the electrical supply to a key coke plant in the industrial town of Avdiyivka.

Part of Metinvest, Rinat Akhmetov’s SKM group, the plant is the biggest of its type in Europe and of strategic importance. On Wednesday, separatist shells killed two men working to restore power to Avdiyivka. DTEK, the energy divsion of SKM had promised to restore power by Friday.

The plant produces metallurgical coke, one of two key components for the production of hot iron. It is a strategically significant economic industrial plant, said Alexander Paraschiy, research head of Concorde Capital in Kyiv.

“Avdiyivka accounts for 2/3 of Metinvest’s internal production of metallurgical coke,” Paraschiy said. “Other coke factories can substitute for its production. But it could take some time and will cost more for Metinvest.”

Alexander Martynenko, head of Corporate Research at Investment Capital Ukraine, agreed that the negative economic impact of a full halt to operations would be significant.

“Avdiyivka Coke is currently the only supplier of metallurgical coke to Ilyich Steel,” he said. “Ilyich Steel produced 11% of crude steel in Ukraine in 2016, and one third of Metinvest’s total crude steel output. A prolonged shutdown at Avdiyivka Coke may significantly undermine operational profit at Metinvest and the economy of Ukraine in general.”

Keep Furnace Fire Burning

If the furnace in a plant goes out, it can be extremely difficult or even impossible to restart. Once empty and cool, coke furnaces become unstable — irretrievably so, within short order — and begin to collapse.

“The coke batteries will be seriously damaged if they stop,” Martynenko said. “That is why they have been put into hot mothballing, while the temperature is supported by burning gas.”

Hot mothballing is a procedure that permits the factory to remain in operation, even with production halted.

“It seems clear now that Russian/rebel forces are on the offensive around the economically strategic town of Avdiivka, which has an important coking plant, water treatment works, and railway hub,” Timothy Ash, an emerging markets analyst for BlueBay Asset Management, wrote from London. “In the past, periods of insecurity in the East, have seen domestic confidence sag quickly, with increased dollarization, pressure on the UAH and reserves, and stalling economic activity, with also pressure on the banks. Perhaps this would all play to Moscow’s script.”

Humanitarian Catastrophe

Analysts said the factory’s loss would have a humanitarian impact.

“The plant is Avdiyivka’s core employer and supplier of heat,” Paraschiy said. “Its stoppage would have adverse consequences for the entire town.”

On Wednesday morning, the Organization for Security and Cooperation and Europe, or OSCE, said that 22,000 people had been left without water or heating as overnight temperatures dropped to minus 20 degrees Celsius.

International Committee of the Red Cross's Ukraine delegation tweeted: "Hostilities continue and people start to lose hope.”

Later on Wednesday, the government started to evacuate residents.

Since the war broke out, in the summer of 2014, over 1 million Ukrainians have had to leave their homes.

In the latest fighting, Ukraine’s army has repulsed separatist attacks on the government-held area . Officials said eight Ukrainian soldiers have been killed and dozens wounded. Ukraine’s troop levels in that sector are unknown, but are estimated in the thousands. AFP estimates that the resurgence in fighting has killed a total of 19 people since Sunday.

Ukraine and Russia have accused each other of launching offensives in the latest violence.

Indicative of the hostility between the two neighbors, Ukraine's Defence Minister Stepan Poltorak said Wednesday that Ukrainian military cargo plane had been shot at with a firearm from a Russian-held gas rig on the Black Sea.

"The shot damaged the plane. The crew were not hurt," he said in a Facebook post.


For comments and story tips, please email UBJ News Reporter Adrian Bonenberger at this address: adrian.bonenberger@theubj.com.

Photo: Ukrainian nationalist protesters poured fake blood Tuesday morning on the doorway of a central Kyiv branch of Russia’s VTB bank. Protesters chanted “No Russian Banks.” (Credit: James Brooke)

Photo: A volunteer collected flowers from the hundreds of people who turned out Tuesday to mourn the men killed defending Avdiyivka (Credit: James Brooke)

Photo: Ukrainian Orthodox priests held funeral services for the slain soldiers. Speaking in Ukrainian, one said they died defending their nation from “Russian aggressors” who want to impose “a Russian world” on neighboring countries. (Credit: James Brooke)

Photo: On Kyiv’s Independence Square, military cadets lined up for the public funeral Tuesday noon of seven Ukrainian soldiers killed in the Russian-backed offensive. (Credit: James Brooke)

Posted Feb. 1, 2017

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