Industrial development under the pressure of high natural gas prices: a case of Ukraine

The purpose of this study is to define the key sources of investments for the steel and chemical companies under the pressure of high gas prices, and the government’s capability to boost their development. To investigate the sources of investments and to identify the quantitative relationships between natural gas prices and company’s indicators, the author used traditional methods of structural, dynamic and statistical regression analysis including the Ordinary Least Squares (OLS) method. When natural gas prices grow the investment activity of steel and chemical companies is reduced. Under the hard pressure of gas prices these companies use only two sources of investments: long-term loans and depreciation. If the company’s unprofitability is long-term, then depreciation is not enough even to cover losses, and the company has to accumulate debts on loans or becomes a bankrupt. To ensure break-even operations of enterprises in these industries, the government should keep natural gas prices below certain limits. With the help of developed models, the author determined the critical levels of natural gas prices for metallurgical and chemical industries. The study is limited to the data on the activity of eight key manufacturing companies from one country only. In the absence of investment and renovation of production technologies the defined critical levels can be used by the government as a boundary, above which these industries will be unprofitable and their fate along with hundred thousands of workers will be questionable. This paper corrects the critical levels of natural gas prices for two manufacturing industries in Ukraine and proves that investment activity depends on the level of these prices.

---

W artykule zdefiniowano kluczowe czynniki źródła mające wpływ na proces inwestycyjny w przemyśle stalowym i chemicznym Ukrainy z uwzględnieniem ceny gazu i stabilności rządowej. Oczywistym jest, że aktywność w tych przemysłach silnie zależy od ceny gazu, autor określił ich krytyczny poziom powyżej którego działalność jest nieekonomiczna. W tym celu Autor użył tradycyjnych metod regresji uwzględniając metodę Ordinary Least Squares. Prezentowane badania dotyczą ośmiu głównych przedsiębiorstw Ukrainy od których była możliwość uzyskania wiarygodnych danych do obliczeń.