OREANDA-NEWS. July 28, 2008. The Federal Antimonopoly Service (FAS Russia) believes that stabilizing prices for metal products will encourage steel companies to sign long-term contracts with a price formulae and fixed scope of supply between all participants of the metal production cycle, from producers of iron ore raw materials to consumers of the end-use metal products, reported the press-centre of FAS Russia.

As in 2008 the prices for iron sources (iron ore raw materials, coking coal, scrap metal, ferrous alloys) and the main type of metal products have had a tendency to increase, FAS Russia has been monitoring prices for iron ore raw materials, coking coal, strips (tube stock), used for manufacturing oil and gas pipes, and oil and gas pipes in the Russian Federation.

FAS Russia has analyzed the prices for strips (tube stock), used for manufacturing oil and gas pipes, and oil and gas pipes in 2007 - 2008. It appears that Russian manufacturers of tubular products raised their prices for oil and gas pipes due to increasing production cost of such items, particularly, because of the growing prices for the iron sources - strips (tube stock).

Having investigated the market of coking coal, FAS Russia initiated a case against "Mechel" Trading House" Ltd., "Yuzhny Kuzbass" OJSC and "Yakutugol" Holding Company" OJSC, members of the group of persons of "Mechel" OJSC, for breaching Part 1 Article 10 of the Federal Law "On Protection of Competition" (abusing dominant position).

Market monitoring has shown that the largest actors on the coking coal market - the group of persons of "Mechel" OJSC and the group of persons of "EurazHolding" OJSC Ltd. deliberately create shortage of certain brands of coking coal on the market in the Russian Federation by reorienting coking coal supplies for export in order to be able to overprice these raw materials (achieving the price growth up to 120 %) as well impose unfavorable contract conditions upon consumers.

Furthermore, due to numerous petitions about growing prices on metals and metal products, FAS Russia has investigated the markets of iron ore raw materials, tube stock, oil and gas pipes, special steels, ferrous alloys, nickel, hardware products, etc.

In February 2008, FAS Russia recognized that the "Electrostal" Metal Works" breached Article 10 of the Federal Law "On Protection of Competition" in terms of fixing monopolistically high goods prices. The "Electrostal" Metal Works" transferred 3.3444 m Rubles turnover fine to the federal budget.

Currently FAS Russia is investigating "Ruspolimet" OJSC and "Alcoa Rus" Ltd. for breaching Article 10 of the Federal Law "On Protection of Competition".

Growing prices for the main types of metal products were discussed at the meeting of the Expert Council on Developing Competition in Metallurgical Engineering, attended not only by its permanent members but also representatives of the largest Russian oil refineries.

Summing up the meeting, FAS Russia has recommended that metal products manufacturers and consumers should adopt several measures for stabilizing metal products prices in the Russian Federation.

In the FAS Russia's opinion, the following measures will encourage iron-and-steel industry development and improve supplies of metal products to the domestic market:

- Entering into long-term contracts with a price formulae for supplied products, that covers all necessary parameters, and fixed scope of supply between all participants of the metal production cycle, from producers of iron ore raw materials to consumers of the end-use metal products;

- Developing exchange trading in non-ferrous metals in the Russian Federation;

- Abolishing import duties for coking coal;

also
- Metal product manufacturers should make anticipating purchase of non-ferrous metals, listed at the London Metal Exchange, for their further processing on a tolling basis;

- Coal suppliers should sell no less than 30% of their product through open bidding.

At the moment, the Working Group on Improving the Antimonopoly Legislation of the Russian Federation, formed by the FAS Russia's Expert Council on Metallurgical Engineering, is analyzing possible types of standard long-term contracts between manufactures and consumers of metal products, formula for product pricing, used in long-term contracts, and parameters to be reflected by such formulas.

The Working Group is also studying the impact of customs tariff regulation on improving the markets of the main metal products (stimulating domestic producers, eliminating the shortage of raw materials, promoting competition).