---
title: "Expensive electricity for metallurgy: the first auctions were won not by industry, but by traders"
description: "The first auctions for long-term electricity contracts in Ukraine were won not by industry, but by traders. Experts propose increasing lots to 20 MW, fixing the security deposit, and excluding speculators from the circle of buyers."
date: 2026-08-26T07:02:03.000Z
lang: en
url: https://xab.info/en/posts/expensive-electricity-for-metallurgy-auctions-won-by-traders-not-industry
tags: [ukraine-energy, electricity-auctions, metallurgy, arcelor-mittal, long-term-contracts, industrial-policy]
publisher: "XAB.info"
---

# Expensive electricity for metallurgy: the first auctions were won not by industry, but by traders

![Worker at a metallurgical plant beside molten metal: costly electricity hits the industry](https://xab.info/media/2026/08/26/dorogaya-elektroenergiya-dlya-metallurgii-auktsiony-dlya-promyshlennosti/dorogaya-elektroenergiya-dlya-metallurgii-auktsiony-dlya-promyshlennosti-1.webp)

## 🎯 Key Points

- The first auctions for long-term electricity contracts in July 2026 were won not by industry, but by traders
- To give factories access to direct contracts, lots need to be increased to 20 MW, the security deposit fixed, and traders excluded from the circle of buyers
- In June 2026, the Cabinet of Ministers obliged Energoatom and Ukrenergo to put up to 4% of generation at the auctions
- ArcelorMittal Kryvyi Rih halted its Foundry and Mechanical Plant in February 2026 due to rising electricity costs, and on August 16 suspended the entire enterprise's operations following a missile strike

In July 2026, Ukraine held its first auctions for the sale of electricity by the state generating companies Energoatom and Ukrenergo (Ukrgidroenergo) under long-term bilateral contracts. The mechanism, which was supposed to give energy-intensive industrial sectors access to predictable and, as expected, more favorable electricity prices, turned out in practice to be inaccessible to end consumers. According to RBC-Ukraine, the main winners of the trades were not factories and steel mills, but traders — market participants focused on the short-term dynamics of the highly volatile day-ahead market.

### Traders pushed industry out of the auctions

As experts note, the price strategy of traders at the auctions is fundamentally different from the needs of industrial enterprises. Traders build their bids around expectations of future price movements on the day-ahead market, which makes their offers competitive at the trades. Industry, by contrast, is interested in locking in prices for long periods — a quarter, a half-year, or a year — in order to build a sustainable financial model for production. As a result, energy-intensive sectors such as metallurgy were pushed out of the circle of buyers at the very first auctions.

### What needs to be changed in the trading rules

In order for factories and steel mills to gain real access to direct contracts with electricity producers, a number of significant changes need to be made to the auction rules. In particular, experts propose excluding traders from the circle of buyers, increasing the lot size — for example, to 20 megawatts, which, according to ArcelorMittal Kryvyi Rih, would better match the consumption profile of large industrial enterprises. It is also proposed to revise the approach to setting the starting price: instead of the current rate, which market participants consider inflated, use the indicator of the weighted average price on the day-ahead market (DAM) for the previous period with a 30% discount. In addition, generating companies should double the supply of electricity at the auctions — to 4% of generation volume — and also remove the requirement for a minimum of five trading participants. The size of the security deposit remains a separate issue; currently the seller sets it at its own discretion within established limits, and to ensure the predictability of the financial model its rate needs to be fixed.

### Legal basis and generators' obligations

The legal framework for holding such trades was laid in mid-June 2026, when the Cabinet of Ministers of Ukraine authorized the conduct of auctions resulting in contracts for a quarter, a half-year, and a year. The obligation to sell electricity for the corresponding periods was placed on the state companies Energoatom (the nuclear power plant operator) and Ukrenergo (large hydro and pumped-storage power stations). In total, these two companies are obliged to put up for sale within the auctions up to 4% of the forecast generation volume. However, as the first trades showed, a formal obligation was not enough — without adjusting the mechanics of the auctions, industry was unable to make use of the new instrument.

### The price for metallurgy: from workshop shutdown to a missile strike

The problem of expensive electricity for Ukraine's metallurgical sector is not abstract. In February 2026, ArcelorMittal Kryvyi Rih was forced to suspend the operation of a separate unit — the Foundry and Mechanical Plant — due to the unprofitability of its operations in the context of rising electricity costs. And on August 16, 2026, the entire ArcelorMittal Kryvyi Rih enterprise was forced to halt operations as a result of a missile strike in which two people were killed and 13 employees were injured. Thus, industry faces a double pressure: from energy costs and from military risks, which makes access to long-term electricity contracts a matter not only of economic but also of production security.

### The position of the industrial community

"Access to long-term contracts for industrial consumers should be one of the key criteria in shaping the auction rules," said Anatoliy Kynakh, President of the Ukrainian Union of Industrialists and Entrepreneurs, whose words are quoted in the RBC-Ukraine publication. In essence, this means that the current architecture of the trades, oriented toward short-term speculative activity, needs to be revised in favor of those participants who genuinely need a multi-year price anchor for planning capital expenditures and production modernization.

## 🔍 Fact-Check Verification

- [Long-term electricity contracts for industry. What needs to be done to make them a reality?](https://www.rbc.ua/ukr/news/dovgi-kontrakti-elektroenergiyu-promislovosti-1787576860.html) - Источник содержит все ключевые факты: результаты июльских аукционов, предложения по изменению правил, цитату А. Кинаха, контекст июньского решения Кабмина, информацию об остановке Литейно-механического завода в феврале и ракетном ударе 16 августа. Противоречий внутри текста не обнаружено.

## ❓ FAQ

### Q: Who won the first auctions for long-term electricity contracts in Ukraine?
**A:** The main winners of the July auctions held by Energoatom and Ukrenergo were not industrial consumers, but traders focused on the short-term dynamics of the day-ahead market.

### Q: What changes do experts propose to give industry access to direct contracts?
**A:** It is proposed to exclude traders from the circle of buyers, increase the lot size to 20 MW, fix the security deposit rate, revise the starting price (weighted average DAM price with a 30% discount), increase generators' supply to 4% of generation, and remove the minimum-five-participants requirement.

### Q: When did the Cabinet of Ministers authorize the conduct of such auctions?
**A:** In mid-June 2026, the Cabinet of Ministers authorized auctions for concluding contracts for a quarter, a half-year, and a year, placing the sales obligation on Energoatom and Ukrenergo in a volume of up to 4% of the forecast generation volume.

### Q: How did expensive electricity affect ArcelorMittal Kryvyi Rih in 2026?
**A:** In February 2026, the company suspended the Foundry and Mechanical Plant due to unprofitability in the context of rising electricity costs. On August 16, 2026, the entire enterprise halted operations as a result of a missile strike in which two people were killed and 13 were injured.