Page 126 - RusRPTNov18

Works, a subsidiary of Anatoly Sedykh’s United Metallurgical Company (OMK), and Evraz NTMK, owned by Roman Abramovich and partners—for setting monopolistically high prices. While the story may appear to only concern the sector, over 80% of Russia's non-pipeline freight uses the railways. Anytime suppliers increase prices, there are knock-on effects down supply chains for consumers. The issue here is that the sector is trapped by the state's reliance on the rail network, preventing them from earning what would likelier be a fairer distribution of profits with price increases. Expect this tension to worsen as new rail projects are announced and built and investments, particularly in extractive industries, are pushed through via political pressure. FAS determines Russian Railways’ (RZhD) tariffs based on the company’s costs for fuel, metal products, and electricity. The regulator wants to keep the growth in tariffs below inflation and will punish RZhD suppliers if their prices grow unreasonably. According to FAS, in the second half of 2017, OMK and Evraz increased the price of wheels disproportionally to changes in production costs. The “aggressive” price hike came after Ukrainian wheels exited the market due to an increase in an antidumping duty from 4.75 to 34.22%. The two companies are Russia’s only significant wheel producers. In 2017, OMK occupied 54% of the Russian wheel market, and Evraz occupied 28%.
9.2.13 Other sector corporate news
Saudi Arabian oil and petrochemical companies Saudi Aramco and Sabic plan to invest in petrochemical plant of Russian Sibur , Saudi Energy Minister Khaled Al-Falih told Rossiya 24 TV Channel on October 31. Al-Falih did not specify which plant is considered: in 2019 Sibur will complete a facility in the Tyumen region and is considering the construction of a gas-chemical complex in the Amur region. Sibur is in focus as the company is expected to announce plans for an IPO , to raise $2bn-3bn based on a valuation of $20bn-$26bn. This would not only make Russia's biggest IPO in more than a decade, but also be a litmus test of the attractiveness of Russia's largest names in the face of the mounting sanction pressure. Saudi Aramco was previously in talks with Sibur eyeing a joint venture that would produce synthetic rubber in the Gulf kingdom . This was confirmed by Al-Falih, who said that Chinese Sinopec and French Total will join the project. Sinopec already owns 10% in Sibur, while Total is a shareholder of Russian Novatek gas producer and champions its liquefied natural gas (LNG) projects. Sibur and Novatek have the same shareholders, namely Kremlin insiders Leonid Mikhelson and Gennady Timchenko (48.5% and 17% stakes in Sibur, respectively).
Blue Origin that belongs to the founder of Amazon Jeff Bezos got a contract to delivery BE-4 rocket engines to the Vulcan carrier rockets of the United Launch Alliance (ULA), according to the reports of the Wall Street Journal and Reuters. The Vulcan rockets will be launched in 2020 and could replace the Atlas V rockers, which have Russian RD-180 engines installed. In September Kommersant d aily said that Russia's Energomash based in the city of Khimki of the Moscow region by 2021 will supply four additional RD-181 rocket engines to the US Orbital ATK to be installed on American Antares-type rockets, despite the US sanctions against Russia. Previously Energomash also supplied RD-180 engines to United Launch Alliances (ULA). Energomash closed the first $1bn deal for over 100 engines back in 1997. In 2016 another 18 engines were ordered, followed by another contract for 6 engines. The US remains the only market for engines of this
126 RUSSIA Country Report November 2018 www.intellinews.com