UKRKOKS ASSOCIATION
Nearly all coking plants related to the Association, except for the Phenol Factory, have already been transformed into joint-stock companies. Although the privatization process is proceeding differently in the newly formed enterprises, the State holds interests in authorized capitals of most of them. The State does not own any stakes in public joint-stock company Avdeyevska Coke Chemical Works, private JSC Koksan, public JSC Markokhim, private JSC Kharkov Coke Chemical Works, and public JSC Koksodetal.
Consolidation of state-owned interests is necessary for the authorities to technically upgrade and reequip the industry. Transformation of a portion of dividends payable on state-owned stakes into no-interest-bearing loans or privileged-term loans can be among the sources of funding for technical reequipment projects. Terms of such loans ought to take care of efficient development of the whole industry, rather than of individual joint-stock companies.
Technical reequipment calls for strategic investors and improvements in the process of non-commercial tenders for sales of state-owned interests. Compliance of investment commitments with the development plans of individual enterprises, which are being privatized, should be one of the pivotal conditions of such tenders.
At the same time, the authorities should execute strict control over how the tenders’ winners fulfill the conditions of non-commercial tenders and meet their investment commitments.
Despite the current problems encountered in the state finance system, there is a need in more incentive fiscal policy that would encourage renewal of enterprises’ tangible fixed assets. Deterioration and depreciation of fixed assets in coke-making has reached the critical point. Alteration of the effective tax law as regards the depreciation policy can bring about an increase in enterprises’ resources required for technical reequipment.
First of all, changes must be introduced into the calculation system for depreciation charges. Currently, the residual value of fixed assets is taken as the basis for calculation (the reducing balance method). This leads to the situation when depreciation charges lessen year on year, while the cumulative depreciation is devaluated by inflation. It would be more reasonable to calculate depreciation on the basis of the original cost of fixed assets (with adjustments for inflation rates). Changes in the effective depreciation calculation and formation of gross costs will lead to minimal or zero profit before taxation.
The situation with supplies of the required quantity of coking coal to the industry currently is and will remain difficult and tense in the near future. The recent years have seen curtailment of coal supplies, as well as lower quality of dispatched coal. The only exception is the sulfur content, which has somewhat decreased due to imports of low-sulfur coals from Russia and Poland.
Underutilization of coking capacities and the chaotic competition among coal consumers have fostered the situation when grade composition of coking charge is far from ideal. As a result, coke has lower quality and blast furnace consume excessive quantities of this product. According to the data with the Ukrainian State Scientific Research Institute for Coal and Chemistry, the industry wastes at least 700,000 tonnes of coke annually as a result of incomplete composition of charge. In turn, this is equal to excessive consumption of 1 million tonnes of coal.
Forms and methods of coal industry’s reconstruction want radical adjustments. First of all, liberalization and decentralization of coal distribution and sales is untimely and damages the national interests. It is necessary to control quality, distribution, and utilization of coal products until supply and demand become well balanced.
The State should aim its policy at bringing of order to trade in technological charges rather than to trade in selected grades of coal.
The industry also needs a more balanced policy of coking coal imports. Import limitations should be introduced only as regards coal grades that are of little use in terms of coke-making.
Poor quality of products is one of the most significant problems faced by the Ukrainian coke-making, because this factor retards enhancement of Ukrainian enterprises’ competitiveness.
Problems with coal sales directly relate to coal pricing issues. Centralization of coal sales should take place together with centralization of pricing issues. Above all, it comes to technological justification of prices for various coal grades and to necessary consideration of quality.
Such a pricing policy ought to be worked out and introduced on the markets for metallurgical coke and coking services. It is also necessary to corellate the price for coking services with the grade of coal supplied and the quality of coke that can be produced from this coal.
Anti-dumping procedures on the market for coking services are the urgent tasks for the executive authorities.
The current state policy in the sphere of coal and coke sales has to marshal the market and force the small firms that fail to meet the strict technological requirements out of the market. In addition, such a policy has to nourish the conditions for gradual return to the normal practice of direct coal purchases by coking plants themselves, leaving the numerous intermediaries aside.