Expensive electricity hits Ukrainian metallurgy: prices above European levels, with traders becoming the buyers of contracts

The high cost of electricity has become one of the key factors undermining the competitiveness of Ukrainian metallurgy in the international market. Since the massive shelling of the energy system began in autumn 2022, prices for industrial consumers — above all for the energy-intensive metallurgical sector — have risen sharply and often exceed the cost of energy in European countries. This is precisely why new mechanisms have come into focus: long-term contracts, which were supposed to lock in prices for an extended period and provide industry with predictable conditions.

The price gap with Europe

According to the state analytical company Ukrpromvneshekspertyza, from January to September 2025 the average price of electricity on the day-ahead market (DAM, the key benchmark) in Ukraine stood at 106 euros per megawatt-hour. Over the same period, the figure was 61 euros in France, 94 euros in the Czech Republic, and 80 euros/MWh in Germany, notes the company's Deputy Director for Development, Serhiy Povazhniuk. A similar picture emerged in the segment of bilateral contracts: over the nine months of the previous year, the average price of contracts for weeks to months ahead in Ukraine held at around 106 euros/MWh, whereas in France it was 65 euros and in Germany — 77 euros.

Dynamics in 2026

In May 2026, the average weighted price on the DAM in Ukraine was 101 euros/MWh — higher than in Slovakia, Germany, France, and Spain, according to data from the GMK Center analytical center cited by the Ukrainian Union of Industrialists and Entrepreneurs. At the same time, in July–August, the average base-load price on the DAM in neighboring European countries temporarily exceeded the Ukrainian indicator — against the backdrop of abnormally high temperatures and low water levels in the Danube River. Nevertheless, for end consumers, especially metallurgical plants, the cost of energy in Ukraine remains quite high. According to the state company Operator of the Market, over the first ten days of August 2026 the average price of base-load electricity on Ukraine's day-ahead market exceeded 140 euros per MWh.

Energy in unit cost

Electricity costs account for a significant share of the unit cost of metallurgical products. In the words of GMK Center analyst and Candidate of Economic Sciences Andriy Hlushchenko, the energy component reaches 50–60% in the price of iron ore concentrate, 30–35% in iron ore pellets, and 10–15% for steel produced in electric arc furnaces. The share of energy in the unit cost of ferroalloys — alloys of iron with other elements added to give the metal the required properties — has also grown substantially. As Serhiy Kudriavtsev, Executive Director of the Ukrainian Association of Ferroalloy and Other Electrometallurgical Products Manufacturers, explains, the energy component for ferroalloys has increased from 22–27% in 2021 to 35–40% today.

China's advantage

Spending more on electricity to produce one ton of steel, Ukrainian metallurgy occupies the worst positions compared with European producers and other suppliers to the EU market, such as China and Turkey. The Chinese government has fully exempted electricity supplied to non-ferrous metallurgy enterprises from taxes and partially lifted the tax burden on energy for ferrous metallurgy. As a result, in some Chinese provinces the price for enterprises can fall to 30 euros per MWh, comments Serhiy Povazhniuk. Moreover, until 2024 China actively purchased raw feedstock from Russia — slabs (large steel plates) — at a significant discount, reaching 20% of market value.

What comes next

Against this backdrop, the key question becomes ensuring industry access to electricity over the long term and at an acceptable price. New long-term contracts and auctions for their conclusion are seen as a tool for locking in costs; however, according to market participants, the predominant buyers at such auctions have been traders rather than the industrial consumers themselves. This exacerbates the problem: metallurgy is forced to factor high and volatile energy prices into its unit cost, which directly reduces its export potential.