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News // Metal market

Fall of metals prices responsible of the failures of Russian steel makers

23 July 2010 , 10:33RIA Novosti2531


Russian steel makers have not fully complied with instructions given by Prime Minister Vladimir Putin to move to long-term contracts with consumers due to a fall in metals prices since May, Kommersant business daily said on Friday. Putin called for the shift to long-term contracts following a series of complaints made by Russian Railways, various automakers and other major consumers about unreasonably high prices. The prime minister is to hold a meeting in the Russian Urals city of Chelyabinsk today to discuss the shift towards long-term contracts.

Kommersant said that long-term contracts have only been concluded with the companies that made the complaints. Metal companies MMK and Severstal have agreed to long-term contracts with the auto industry, but with the option of correcting the prices every quarter, the Federal Antimonopoly Service (FAS) told Kommersant. Steel company Evraz signed a contract with machine building company Uralvagonzavod on a fixed price until the end of the year (price in the second half will be 17 percent higher than in the first half), a source close to the company said. It has also agreed on pricing with Russian Railways until 2012. The price will be pegged to the cost of scrap metal, plus about 9 thousand rubles per ton and will be reviewed every quarter, Kommersant said.

Smaller consumers are refusing to go onto long-term contracts because of price volatility, a source from one of the companies told Kommersant. Since May, the price of steel has dropped more than 20% and it continues to fall, the source added. The FAS is continuing to investigate unreasonably high steel prices. Next week the service is planning to announce the results of an audit on Severstal and MMK, a source in the service said. Signs of violations, he said, are that MMK worked with an unreasonably high return of 80% and Severstal was selling one type of product at different prices. 

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