The inflated prices of raw materials such as coal and
iron ore forced Russian steelmaker Magnitogorsk Iron & Steel Works (
MMK) to reduce
production levels for certain products.
A company release details that the steelmaker failed to meet planned cast iron and steel
production targets in January and February. The largest shortfall was in February, when the company only achieved 96.9% of planned cast iron
production.
MMK cited the poor performance of the blast-furnace plant as being one of the main reasons behind the companys sub par performance.
The domestic price for coal rose nearly 52% from December 2004 to March 2005, forcing
MMK to turn to lower quality substitutes. This resulted in sporadic failures of the blast furnace, thus preventing
MMK from reaching its
production goals.
In addition to the coal problem, the company faces an equally troublesome quandary regarding
iron ore. Since the end of last year, Russian ore prices have soared from $40 to $110 per ton. Possible contract price revisions in April may lead the largest ore producers to raise their prices even higher.