The Russian steelmaker Novolipetsk Steel (NLMK) has announced that it has signed a one-year contract with Russia's leading car manufacturer AvtoVAZ to supply cold rolled and galvanized steel.
Under the agreement, over the next twelve months NLMK will deliver a total 180,000 mt of cold rolled steel including 36,000 mt of galvanized steel, with enhanced mechanical properties for the production of AvtoVAZ car body parts. Steel deliveries to the car manufacturer will commence in April.
"The companies have successfully developed a pricing scheme for steel based on applicable market indicators. Prices will be determined using a formula reflecting pricing dynamics in the international steel market," reads NLMK's statement.
Previously, AvtoVAZ had bought about 60 percent of required steel products from another Russian steel producer, namely, Severstal; however, since autumn last year the parties have been locked in a dispute over prices. In 2011, Severstal was planning a 30 percent increase for flat steel product prices based on higher production costs, and said that it was ready to halve its deliveries to AvtoVAZ from 200,000 mt in 2010 to 100,000-200,000 mt.
The second key supplier of AvtoVAZ, covering the remaining 40 percent of its demand for steel products, is Magnitogorsk Iron and Steel Works (MMK), which, however, had said that it would not be able to increase deliveries to AvtoVAZ as its auto sheet production capacities are fully utilized.