Russian steel giant under investigation

Russia. FAS opens investigation into Evraz.

The Federal Anti-Monopoly Service opened a probe into steelmaker Evraz Group's prices last week, the watchdog's chief, Igor Artemyev, said.
The announcement spooked investors. The steelmaker, whose owners include billionaires Roman Abramovich, Alexander Abramov and Alexander Frolov, is Russia's leading producer of rails. The company's Novokuznetsk plant accounts for about two-thirds of the country's rail production, while its Nizhny Tagil facility also has significant rail and railway wheel output. "Last week, an anti-monopoly investigation and case were opened into Evraz regarding high, monopoly-like pricing," Artemyev said during a meeting with Prime Minister Vladimir Putin, according to a transcript on the government's web site. The comments came after Putin mentioned to Artemyev that he was concerned by a steep rise in prices in the metallurgical sector, alluding to something they had "recently" discussed. "The possibility of raising prices on metallurgical production has been raised. This matter needs to be discussed in the most serious way with our colleagues from the business community," Putin said. "We need to look at the realities, at the structure of price formation and the other factors that influence this process." Citigroup analysts said rival steelmaker Magnitogorsk Iron & Steel Works, or MMK, in April raised hot-rolled coil Caspian Sea export prices to $710 to $715 per metric ton, from $550 in January. Domestic ex-works prices for the product were about $500 per metric ton in March, they noted. Local media reports said last month that Oleg Siyenko, head of state-owned railway car and tank manufacturer Uralvagonzavod, complained of rising steel prices to Deputy Prime Minister Igor Sechin. State-owned Russian Railways also said last month that it could not afford cost increases by Evraz of 10 percent to 20 percent for rails and other steel products. A statement appeared later on the anti-monopoly service's web site confirming that the investigation was ongoing, and that it was also investigating Russian coking coal, iron ore and other prices in the metallurgical sector. An Evraz spokesman told Reuters that the company had yet to receive a formal notice from the service, but that the current discussion could be related to the Uralvagonzavod letter. "Two enquiries were carried out at Evraz by [anti-monopoly service] in relation to this, and if [Monday's] discussions are related to this, Evraz has provided all documents and explanations in the framework of the first enquiry," he said. The spokesman said his company was still in the process of replying to the second. He declined to comment on which of its product prices were the subject of the investigation. Siyenko had called for domestic steel prices to be fixed until April 1, 2011. If steelmakers disagreed, he asked the government to introduce a 15 percent export duty.