The Russian steelmaker Magnitogorsk Iron and Steel Works (MMK) has announced that, due to its long-term contracts, it does not face any problems with essential raw material supplies for its steel production.
The strong increases in raw materials prices on the world market have not significantly affected MMK's production data. Thus, during Q1 2008 the company recorded an 8.1 percent increase in its steel production and a 5.8 percent rise in its iron ore production year on year.
As MMK chairman Victor Rashnikov stated, long-term contracts cover the largest part of the company's demand for essential raw materials, guarantee supplies, and increase the steelmaker's ability to forecast production costs.
Currently, MMK has a ten-year contract for supply of agreed volumes of iron ore with Kazakhstan's Sokolovsko-Sarbaysky Mine, five-year contracts with OOO Raspadskiy Ugol, Kuzmetugol, Sibugol, and DT Mechel for coking coal supplies, five-year contracts with ZAO Profit for metal charge supply and with Chelyabinskregiongaz for natural gas supply. It also has a contract until 2015 with Novatek OAO for natural gas supply.
Moreover, MMK plans to increase its own iron ore stock to 30 percent by raising the iron ore output at its Malyi Kuybass, Podotvalnyi and Bakal ore fields. Another 70 percent of iron ore demand will be covered by MMK's Prioskolskiy Ore Mining and Processing Enterprise, scheduled to start construction work next year.
MMK's coking coal demand is planned within a few years to be 60-70 percent covered by Belon Coal Company ("Belon"), in which MMK owns a 41.3 percent stake.