Ukraine's oil extraction plants may halt operations due to problems in energy sector - analysts

MOSCOW. April 17 (Interfax) - Ukrainian factories making sunflower oil may have to suspend their operations in the event of further damage to the country's energy infrastructure, which is already in critical condition, Ukrainian media said, citing experts from the analytical center of the Ukrainian Agri Council's PUSK agricultural cooperative.

"Ukraine exported 46,000 tonnes of sunflower in April. The main buyers were Romania and Bulgaria. The sunflower stock that Ukraine now has is very small, and there could be a certain shortage of this oil in May-June. However, it may not prompt an increase in prices, as prices for vegetable oils, both soybean oil and palm oil, are falling on world markets," the experts said.

Problems in the energy sector are another factor affecting the market.

"The majority of processing plants are powered by electricity. Almost all processing enterprises have diesel generators, but it is unadvisable to switch to them as production costs will grow," they said.

Some of these plants will be forced to halt their operations due to electricity shortages if energy infrastructure facilities sustain further damage, the analysts said.

"The state will start forwarding all electricity to the population in a critical situation rather than to businesses," they said.

The overwhelming majority of factors will cause prices on the market for sunflower oil and other vegetable oils to decline, they said.

"Gross profit margin in the processing sector is now generating either zero profit or very small profit: about $10-$15 per tonne. Obviously, there is now a larger number of factors on the market in favor of a further decrease in sunflower prices. Prices for this oilseed passed their peak back in January, if the currency exchange rate is taken into account. The bottom to which sunflower prices could fall is 15,300-15,500 hryvni per tonne, though this week factories are offering the price of 16,600 hryvni per tonne. It is necessary to watch the prices for vegetable oils: as soon as they start to decline, so will the sunflower prices," the experts said.