Shares of Russia's largest coking coal producer Mechel regained some of their losses after the company promised on Friday, July 25 to cooperate with the Russian federal authorities on the formulation of its coking coal prices.
In its first official press release following last week's harsh criticism from Russian Prime Minister Vladimir Putin regarding Mechel's coking coal price policy for the domestic market in the first quarter of 2008, Mechel stated that it shares the concerns of the government and of the other domestic metallurgical sector participants regarding the growing steel and raw material prices and that it has already started forming long-term delivery contracts with key market players. "As was previously announced, Mechel has started the process of forming long-term commercial relationships with key partners and have signed a number of agreements for delivery of its products till the end of the year," Mechel stated.
On July 24, during his meeting with Russian metallurgical sector players held in Nizhniy Novgorod, Mr. Putin harshly criticized Mechel for its sales of coking coal for export at prices twice as low as its domestic market sales price in the first quarter, and asked the Russian Federal Antimonopoly Services (FAS) to investigate the situation.
Putin's comments not only provoked a serious fall of Mechel's share price both on the RTS and MICEX, but also caused a decrease in the value of shares of other Russian metallurgical companies such as Severstal and MMK. Meanwhile, following the fall of Mechel's shares, many market players drew a parallel with the oil firm YUKOS, which went bankrupt following sharp criticism from Putin. However, attempting to refute such a parallel, Russian Industry Minister Viktor Khristenko expressed the hope that the situation relating to Mechel would be resolved soon, after key market players built up normal relationships based on long-term contracts.