Boston, MA -- (SBWIRE) -- 07/23/2013 -- Ukraine's mining industry continues to muddle through a protracted process of restructuring, which in 2012 led it to simultaneously sign major deals with China on revamping coal mines and cooperate with the EU on shutting down its non-productive mines. Although the lack of political resolve and consensus continues to hamper privatisation plans for the country's state-owned mines, progress is being made on the sell-off. In contrast to a steady economic growth outlook in Ukraine over the coming years, we forecast on a moderate average growth rate of 1.2% in the value of the mining industry, reaching US$9.4bn in 2017, from US$8.9bn in 2012.

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We hold a moderately bullish outlook on Ukraine's mining industry, and expect coal growth to be the main driver of the mining industry. Despite the government's plans to privatise all state-run mines will be privatised by the end of 2012, such an undertaking has not yet been completed. The EU-backed Coal Sector Policy Support Programme concluded that Ukraine should shut down 29 of its non-productive coal mines by 2016. In any case, the mine closures - expected to take 15-24 months for an individual mine - will carry a direct cost of around UAH4bn (US$495.07mn).

Meanwhile, we believe that a coal agreement signed between Ukraine and China in 2012 will not have a significant impact on Ukrainian coal production in the short term. Looking ahead, however, we believe the agreement could go some way in enabling Ukraine to become completely self-sufficient in coal and bring an end to the country's dependence on imports to satisfy most of its petroleum and natural gas demand.

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