FAS Opens Case Against Steel Firms

MTA worker at Magnitogorsk Iron & Steel Works, which is under investigation for abusing its dominant market position.
The Federal Anti-Monopoly Service has opened a case against Magnitogorsk Iron & Steel Works and Oskol Electric Steel Works for allegedly setting unfair steel prices, Alexei Ulyanov, head of the service's Industry Control department, said in an interview Tuesday.

"We are conducting an investigation into the companies, which are suspected of abusing their dominant market position by setting monopolistically high prices," Ulyanov said.

While the prices on the steel market have fallen by 30 percent to 50 percent this year, Magnitogorsk Iron & Steel Works and Oskol Electric Steel Works have cut prices for bearing steel by only 2 percent to 4 percent, Ulyanov said.

"It is the first in a series," Ulyanov said. "As the crisis unfolds, we expect there to be more delinquent price-setters on the metals market."

Magnitogorsk Iron & Steel Works, or MMK, said Tuesday that it had not yet received any documents from the service. "We are ready to fully cooperate as soon as we receive the service's questions," company spokeswoman Yelena Azovtseva said.

A source close to MMK said company officials were taken aback by the decision. "MMK has only been producing small quantities of bearing steel, so it simply couldn't have abused a dominant market position," the source said.

Metalloinvest, the parent company of Oskol Electric Steel Works, said in an e-mail that the company would not comment until it received the documents from the anti-monopoly service.

The investigation, launched Monday, also seemed to catch the bearing-makers by surprise. While the anti-monopoly service typically starts an investigation in response to a complaint, this time it has opened the probe on its own accord.

Five bearing-producing plants surveyed by The Moscow Times on Tuesday said they did have problems with the pricing policies of the steelmakers but that they never complained to the anti-monopoly service about it.

"Prices for bearing steel have doubled since last year and haven't corrected despite the falling markets," Mikhail Mazurov, chief executive of Samara Bearing Plant, said by phone Tuesday.

"Steelmakers promised us that they would drop the price by 5 percent to 10 percent this month, but we haven't seen any progress so far."

Neither the steekmakers nor the bearing plants would reveal current market prices for the metal.

The European Bearing Corporation, which occupies roughly half of the country's bearing market with five plants in Russia and Kazakhstan, said Tuesday that it also had concerns about the steelmakers' pricing policies but that it had not shared them with the service.

A commission has been formed to investigate the pricing policies of MMK and Oskol Electric Steel Works, and the date of the first hearing in the case will be chosen later this month, Ulyanov said.

If found guilty, the steelmakers could face a fine of 1 percent to 15 percent of last year's sales of bearing steel.