The Russian steelmaker and iron ore producer Evraz Group (Evraz) has said that in July it will temporarily close the melting shop at its Czech-based subsidiary Evraz Vitkovice Steel if it fails by July 1 to reach a price agreement on pig iron supplies with ArcelorMittal Ostrava, Czech-based subsidiary of the world's largest integrated metals and mining company ArcelorMittal.
Vitkovice has agreed to adopt the pricing formula proposed by ArcelorMittal as a basis for negotiations. The formula includes a quarterly indexation of the base price, considering changes in prices for iron ore and coking coal. The base price offered by the raw material supplier is currently 13 percent higher than the level which Vitkovice is ready to accept, the Interfax-Ukraine news agency has reported citing a statement from Vitkovice.
In addition, it is reported that Vitkovice is also in talks with third parties for possible purchases of slabs in case the idle time of the melting shop drags on. Evraz's subsidiaries may satisfy about 20 percent of the slab requirements of Vitkovice's rolling shop, which will continue to operate. Remaining slab requirements are expected to be purchased from Slovakia, Ukraine, Russia, Turkey and other countries.
In its turn, ArcelorMittal Ostrava is also keen to end the pig iron dispute. The plant currently faces a "dramatic outage" as Evraz buys a fourth of its production, ArcelorMittal Ostrava's CEO Augustine Kochuparampil said in an interview with E15 earlier this week.
As SteelOrbis previously reported, the long-term agreement which guarantees the supply of liquid pig iron from ArcelorMittal Ostrava to the steelmaking facilities of Evraz Vitkovice Steel until 2015 was signed by both sides in May 2009. However, in May this year, Pavel Tatyanin, head of Evraz's international operations, said that the agreement in the current situation is disadvantageous, as the plant has been losing money since 2009 due to the high prices for pig iron demanded by the Czech unit of ArcelorMittal.