The main shareholder of Russia’s NLMK group, the one large steel producer that has not been sanctioned yet, has recently shared his thoughts regarding the consequences of the ongoing war in Ukraine on business and on Russia’s economy and its future prospects. Vladimir Lisin, who owns a major stake of NLMK, has stated that the current situation is very challenging and urged the government not to take premature regulation actions.
At the same time, commenting on the sanctions imposed against Russia, Mr. Lisin said that there is a disruption of supply chains that have taken years to build, including logistics, payments and financial infrastructure. “In this context, the rules of the game are changing every day, with new restrictions being imposed. We are changing our business and trying to deliver on our social commitments in the face of tremendous uncertainty,” he said in an official interview given to local Russian press.
According to Mr. Lisin, a lot of the Russian government’s regulatory initiatives have been rushed through, including the suggestion to have a list of goods for export in rubles. First, the first was for natural gas, but later on there was an initiative to add other goods, including metals, fertilizers, grain, oil, timber, etc. “Maybe it could work with gas, but the rest? We’ve spent decades competing in export markets, where customers are not exactly waiting for us with open arms. We’ve established relationships with thousands of customers in 70 countries. It’s hard to imagine how we could convince our customers to switch to settlements in rubles and take on currency risks. Logistical issues have already complicated the delivery of our products to our customers. Switching to ruble payments will just exclude us from global markets,” Lisin said.
The recent regulations affecting the local steel trade were also commented on. The recent initiative to regulate local prices for steel and some other industrial products may result in production disruptions rather than lead to an easier life for businesses, Lisin said. “We are already seeing a rise in transportation costs,” he stated. “No sooner had the Russian Railways proposed a 30 percent increase in tariffs for export steel shipments than they submitted a new proposal for a quarterly tariff indexation based on the rate of inflation and the currency exchange rate difference. The idea of indexing transportation tariffs while fixing prices for everything else will result in it only being possible to transport metal and fertilizers by rail - and everything else only by road. This would be a complete collapse for agriculture,” Lisin commented regarding the local transport regulations and their possible outcome.
In addition, Lisin commented regarding the government's initiative aimed at creating a consolidated railcar fleet managed by Russian Railways, saying that the private companies, which have been investing in machine-building and now account for over 70 percent of the fleet availability, now just have to hand their share over to Russian Railways.
