Page 149 - RusRPTMay21

If found guilty MMK, NLMK and Severstal could face fines calculated as a%age of their revenue, according to current legislation.
FAS went on accuse the companies of colluding to hold prices on the domestic market up artificially high.
Prices for flat steel on Russia’s domestic market have been growing at a significant rate over the past six months. We estimate that ruble-denominated prices for hot rolled coil steel (HRC), the main type of flat steel, have grown 60-68% over the past six months,” Sova Capital said in a note. “Other flat steel products (e.g. CRC) have seen similar pricing dynamics, as ruble-denominated prices have risen 63-78% during the same period. We estimate that MMK, NLMK and Severstal together account for over 88% of Russia’s HRC production.”
The strong growth in domestic prices has been driven largely by the strong growth of steel prices on export markets and, to a lesser extent, by weaker FX. Since November when the commodity markets started to recover in anticipation of the end of the coronacrisis prices have risen strongly and international iron prices on the London Metals Exchange (LME) are at nine-year highs.
“The strong growth in Chinese steel production (+10% y/y, 1Q21) and imbalances in the iron ore supply have pushed seaborne iron ore prices to all-time highs of more than $190/t (fines, 62% Fe, CFR Qingdao). Higher prices for iron ore, one of the main components of steel production, have resulted in a higher cost base and higher steel prices. Export prices for slab and HRC ($/t, FOB, Black Sea) have posted similar dynamics over the past six months (up more than 70%),” Sova Capital said.
According to current legislation, penalties could include financial fines pegged to the companies’ revenue for the current year. On February 9, the FAS published the results of a similar investigation in which it concluded that steel prices in Russia during 4Q20-1Q21 had been driven by market factors.
“We believe that the current investigation could lead not only to sizable financial penalties for the companies under investigation but also to further long-term negative effects, such as a greater tax burden, higher export duties and the stricter regulation of pricing,” Sova Capital said.
The World Steel Association (WSA, formerly IISI) has published its Short Range Outlook for 2021-22, forecasting Chinese steel demand to grow 3% YoY in 2021 and 1% YoY in 2022.
149 RUSSIA Country Report May 2021 www.intellinews.com