A sharp rise in mineral prices could paralyze the subsoil use industry in 2025

Representatives of the EBA Subsoil Use Committee once again emphasize the imperfection of the approach to determining prices for units of mining products. According to experts, due to the sharp increase in mineral prices announced for the third quarter of 2024, the acquisition of new special permits for subsoil use at auction has actually been suspended.

The situation is similar with the existing special permits, which require payment of fees. This primarily concerns minerals, the prices of which have increased the most. The EBA experts warn that given such market dynamics, the publication of prices for the first quarter of 2025 may lead to a longer blockage of the sector's activities - at least until the end of 2025.

The need to revise approaches to price setting

The business emphasizes that further failure to resolve the issue could have serious consequences for the investment attractiveness of the industry. High initial prices for special permits may make extraction unprofitable, which will lead to a reduction in state budget revenues and a general deterioration in the economic situation.

For example, in the first quarter of 2024, the price for sand was UAH 161 per cubic meter, and in the fourth quarter, the price was already UAH 4427.3 per cubic meter. Such a sharp rise in the price of sand - by almost 30 times - within one year directly affects the final cost of products in the same construction and may negatively affect the process of rebuilding Ukraine.

Industry representatives are also concerned that the approved prices do not correspond to market prices and, for some minerals, exceed market values by more than 26 times.

Business supports changes, but there are still no real updates

The Ministry of Environmental Protection and Natural Resources of Ukraine and the State Service of Geology and Subsoil of Ukraine have developed draft amendments to the Methodology for Determining the Initial Sale Price at an Auction (Electronic Bidding) for a Special Permit for Subsoil Use. The business community welcomes this step, but draws attention to the fact that no actual changes have taken place so far.

The EBA has already appealed to the relevant ministries and agencies to reconsider the approach to determining prices for units of mining products and starting prices for special permits. The business expects prompt amendments to the Methodology, which will unlock the sector and promote its development.