Closure of Operations at Horishni Plavni
Ferrexpo has suspended mining and pellet production operations at the Horishni Plavni complex, located 280 km southeast of Kyiv, in the second half of 2026. The decision was made after Russian attacks compromised export routes via the Black Sea. The physical node is the integrated system for extraction, processing, and transportation of pellets, with a pelletizing plant directly connected to the mining wells.
The historical production capacity of the site was approximately 1.269 million tons per year as of the third quarter of 2024. In the second quarter of 2026, output increased to 860,213 tons of pellets — an increase of 64% compared to the first quarter — but remains below a stable operational threshold. The suspension affects not only the volume produced, but also the quality: Ferrexpo’s pellets are DR-grade, essential for low-carbon steel produced with DRI-EAF technology.
Steelmaking Infrastructure in Crisis
The Horishni Plavni plant was designed for a continuous flow: the extracted ore is transported via internal tracks, processed with pressure filters (installed in 2024), and compacted into pellets ranging from 6-15 mm. The processing capacity of the entire system is approximately 18 million tons per year. The blockage of maritime routes has made it impossible to export the product, causing a physical accumulation and putting pressure on internal storage systems.
Logistics are constrained by the port capacity of the Black Sea: the route via Odessa or Chornomorsk requires ships with a capacity of 50,000-120,000 tons, and transit costs have increased by 47% since 2023 due to operational risks. The average time for releasing goods at the port has increased from 5 days to over 18, with delays related to security checks and procedures.
Electricity Costs and Impact on the Steel Industry
The operating costs of the complex are estimated at $45 million in 2024, with an operating profit of $17.6 million. The net loss was $50 million – a sign of a fragile financial structure. The company stated that without further financing, liquid assets will be depleted by mid-September 2026.
The European steel market has been affected: ArcelorMittal, Ferrexpo’s main customer, has already begun to review contracts with alternative suppliers. The cost of DR-grade pellets has increased by 28% compared to the first half of 2026. The average price has risen from $135/ton to $173, directly impacting the production cost of crude steel.
Emerging Trajectory and Structural Limit
The dominant effect is the immediate reconfiguration of supply chains. European steel companies are activating alternative routes: rail transport from Poland or Romania, with an estimated additional cost of $85/ton for transfer and regasification of the load.
The structural limit is physical: no other plant in Europe has equivalent production capacity. The second largest production of DR-grade pellets is located in Sweden (Luleå), with a maximum output of 3.5 million tons per year — insufficient to cover the 12% gap generated by the closure of Horishni Plavni. The Impact KPI is a net loss of $50 million in 2024 and depletion of liquid resources by mid-September.
Decision Making for the Decision Maker
If you are evaluating investments in European steel, monitor data on port traffic in the Black Sea and the availability of DR-grade pellets. If the export volume from the Black Sea falls below 180 million tons per year for three consecutive months, the logistical alternative becomes critical.
Photo by Simon Kadula on Unsplash
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