The Russian steel producer Severstal has announced that it has reached an agreement with Russian state-owned heavy machine building company and the country's main battle tank manufacturer, Uralvagonzavod, over rolled steel product supplies in the third quarter.
Accordingly, the parties came to an understanding and agreed on the same price level as for the second quarter, also fixing the amount of consumption. Severstal's average monthly deliveries to Uralvagonzavod will be up to 2,000 mt.
In early June this year, Uralvagonzavod sent a letter of complaint about Severstal to Russia's deputy prime minister Igor Sechin, stating that the steelmaker, occupying a dominant position in the domestic market of boiler plate, overprices its products. In early June Uralvagonzavod signed a contract with Severstal covering a period of one month, agreeing on a price increase of almost 30 percent. The steelmaker at the same time promised to increase supplies to the plant by 50 percent. Uralvagonzavod said that it was forced to accept the new pricing conditions, as in April-May there were almost no shipments of boiler plates to its plant, and production was threatened by stoppage.
Since mid-May domestic steel prices are under the scrutiny of the Russian Federal Antimonopoly Service (FAS), following the complaints of the country's machine building, car-making and pipe producing companies, as well as of Russian Railways, regarding 10 to 30 percent steel price increases. Meanwhile, Russia's Ministry of Industry and Trade recommended the companies to conclude long-term contracts with their suppliers.
The first company to agree the price rise and conclude long-term contracts was the automobile manufacturer AvtoVAZ, agreeing average steel price increases of 22 percent with its suppliers Severstal and MMK, followed by other automakers.