OREANDA-NEWS. July 12, 2010. The Federal Antimonopoly Service has started an investigation into coking coal producers Evraz, Raspadskaya, and Severstal, IFX reported yesterday. The inquiry revolves around the difference between domestic and export prices charged in 1Q10 on GZh and Zh grades of coking coal (semi-hard coking coal, close to HV HCC). According to FAS, though prices differed for various buyers, this difference was not related to transportation costs or volumes, reported the press-centre of OTKRITIE Financial Corporation.

View: FAS’s interest in coking coal prices appeared as a result of investigation of high steel prices initiated by PM Putin, following complaints from steel consumers. As a result, FAS determined that coking coal prices for domestic customers were unfair. In our view, this investigation will not have any significant consequences for coking coal producers, since we believe the 1Q10 prices were a function of domestic and global coking coal market conditions. From our standpoint, the worst case scenario would involve fines, though that would likely not have any significant impact on the companies’ financials.

Valuation and Action: Although we believe that the investigation will not have any significant consequences for the companies mentioned above, scrutiny from FAS usually creates a bad sentiment across the stocks.