Mittal Steel Temirtau after Russian Mignitogorsk forces SSOMPU to decrease prices for its production - EIA

/INTERFAX-KAZAKHSTAN, Almaty, June 14, 05/ - Mittal Steel Temirtau JSC (previously Ispat Karmet JSC, In Karaganda oblast of Kazakhstan), is a biggest producer of steel production in Kazakhstan, right after Magnitogorsk metallurgical plant JSC (MMP) forces Sokolovskoe -Sarbayskoe ore mining and processing production unit" (SSOMPU, in Kostanai oblast of Kazakhstan) to decrease prices for its production. This is informed in press release of department for connections with people of Eurasian industrial association (EIA), spread on Monday, whose member is also SSOMPU. "In hard situation for SSOMPU today is also more than significant position of sole Kazakhstan consumer of SSOMPU's production - Mittal Steel Temirtau". Its management seems decided to take situation. This company offers today to Sokolovskoye to decrease prices immediately by 500%. And this is low minimum in 3 times similar offers from Russian and Ukraine suppliers", - it is noted in press release with reference to official letter received from Mittal Steel Temirtau N16-924 dated June 2, 2005. So, press release informs, that Mittal Steel concluded contract for delivery of 50 th. tons of ore pellets in June-July of the current year with Kachkanar ore mining and processing enterprise (RF), and also conducts active negotiations with Poltavskiy ore mining and processing enterprise (Ukraine). "Using its monopoly position relative to SSOMPU, Mittal Steel Temirtau neglects interests of domestic producer and tries toughly dictate its conditions", - message stresses. Besides, EIA press release notes, that MMP tries to press unjustifiably SSOMPU (from point of view of real market situation)". "Repeated insistence to decrease prices up to 40%, in April-May 2005 MMP concluded contracts for delivery of iron-ore raw material (IORM) from Stoilensk, Kostomukshskiy, Korshunovskiy, Kavdorskiy and Poltavskiy ore mining and processing enterprises by market prices, which much exceed offer of SSOMPU", - press release informs. Along with this, EIA informs, that on June 3, 2005 MMP lobbied introduction of decreasing coefficient to tariff for transportation of iron-ore raw material from Ukraine towards Russian consumers. According to press release, delivery of Russian and Ukraine ore mining and processing enterprises in June-August will close in full volume demands of MMP in IORM to provide planned volumes of production in situation of raise of offer above demand. According to EIA information, summary surplus of IORM offer at Russian and Ukraine market is more than 5 m. tons, as consumption of European, Russian and Ukraine metallurgical plants considerably decreased. EIA supposes, that actions against SSOMPU "were approved and coordinated after recent meeting of owners of MMP and Mittal Steel in London". Message of EIA also reminds that similar situation was in 1998, when main consumers, first of all Ispat-Karmet and MMP, after forcing SSOMPU to stop production for 8 months, purchased IORM at Russian market. "All events around SSOMPU one more time say about correct and reasonable idea of uniting Russian and Kazakhstan ore mining and processing enterprises into one big company, as it was told in mass media. Such company is able flexibly react to any force influence of metallurgical consortiums", - EIA is confident. As EIA considers, in case of creation of ore mining and processing enterprise "center of income in this case will be adventure, which will be able efficiently realize production and invest money in own development, but not in development of metallurgical revision". "Otherwise control of metallurgical enterprises upon ore mining subdivision unambiguously will lead to efficient metallurgical revision and most of income will go out of Kazakhstan through steel production, prices even today vary in a very wide diapason", - message notes. As a whole EIA notes that situation at SSOMPU "is still difficult". So, as on June 10, 2005 warehouses of SSOMPU kept more than 1.4 m. tons of finished production. Besides, as it was informed, SSOMPU decreased production volumes due to absence of realization of finished production. "Coordinated blockade of SSOMPU from MMP and Mittal Steel may continue, according to our assessment, till August-September 2005. Predicted expectations for this period are connected with reviving of IORM market on the basis of stabilizing market of metallurgic production", - press release says. As it was informed, on May 9 SSOMPU stopped delivery of ore pellets to MMP address. SSOMPU is the biggest producer of iron-ore raw material in Kazakhstan, particularly, concentrate, fluxed pellets. EIA with SSOMPU JSC include Aluminum Kazakhstan JSC, Eurasian energy corporation, enterprises of Kazchrome transnational company. [2005-06-14]