Ukrainian steel producer Ilyich Iron and Steel Works of Mariupol (Ilyich) has agreed with Ukrainian miner and steelmaker Metinvest on iron ore delivery terms for April 2009.
According to the iron ore purchase contract for April signed by the parties, Metinvest has reduced its iron ore price for Ilyich from the previous level of $55/mt to $42/mt.
However, Ilyich CEO Vladimir Boyko considers the contract not to be profitable and deems the agreed iron ore price to be rather high. According to Mr. Boyko, the economically feasible cost of iron ore concentrate in the Ukrainian domestic market is a maximum $35/mt.
As SteelOrbis previously reported, in March 2009 Mr. Boyko said that Ilyich would refuse to sign iron ore purchase contracts for April with Metinvest subsidiaries under the previous year's conditions, and could halt its purchases unless the companies in question decreased their prices. Following the latest agreement, Mr. Boyko said that next month Ilyich could take the above steps if Metinvest does not further decrease its iron ore prices for the May 2009 contract. "Currently, it is possible to purchase iron ore with a higher level of iron from Russia for a price of $35-37/mt," added Mr. Boyko.
Meanwhile, some experts have said that such statements are caused by Mr. Boyko's desire to beat down the price, especially as there is no profit from purchases of raw materials from abroad, with transportation from Russia to Ukraine amounting to an additional $5-10/mt. Thus there would be no great difference between Metinvest's new price and that of Russian iron ore.
At the end of December 2007, Ilyich and Metinvest signed a long-term supply contract for a period of three years.