Mechel bypasses traders, ships stainless steel directly to end-users

According to the Russian Special Steel and Alloys Consumers and Suppliers Association (Spetsstal), Mechel, one of the leading Russian mining and steel groups, decided in late December 2010 to discontinue shipments of stainless steel products (stainless steel sheets, hot rolled (HR) and forged stainless steel long products, stainless steel long products with special finishing, and stainless steel round billets) to intermediaries (i.e., traders), and to increase direct sales to end-users.
 
According to Spetsstal, Mechel's subsidiaries have a dominating position in the Russian market for stainless steel flat and long products. The share of Mechel's Chelyabinsk Metallurgical Plant in the production of flat hot rolled stainless steel in Russia amounts to over 80 percent of the total output, while its share in cold rolled stainless steel production (including strip) amounts to more than 95 percent. Mechel's enterprises produce more than 65 percent of Russia's total stainless steel long products.
 
"Mechel has divided all buyers into approved buyers and excluded buyers. For a monopolist, such behavior appears logical. However, we wonder for whom the traders used to buy stainless steel from Mechel. Obviously, for the end-users, who are compelled to break their business ties with the traders and go cap in hand to Mechel in its majesty. We doubt Mechel's decision is consistent with the current antimonopolistic regulations in Russia," Spetsstal commented.
 
Spetsstal also noted that more than 75 percent of Russia's total sales of stainless steel to end-users were via steel trading companies. Traders were also the main customers for Mechel's stainless steel products. "By ordering, stocking and redistributing, traders were maintaining a supply and demand balance depending on market conditions," Spetsstal said.