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. Last Updated: 07/27/2016

MMK, NLMK Announce Cooperation

Two of the country's largest metals producers -- Magnitogorsk Iron and Steel Works, or MMK, and Novolipetsk Metals Plant, or NLMK -- have announced a cooperation agreement.

"There is no point in competing with Magnitogorsk on one market or investing in the creation of identical production," Vladimir Lisin, chairman of NLMK's board of directors, said Tuesday. "Working together will increase profitability, split risks and optimize costs."

Lisin said the cooperation would be "perfectly legal and avoid unnecessary taxation." He did not give further details.

Both Lisin and MMK general director Viktor Rashnikov said their alliance would participate in an upcoming sale of a 17.8 percent stake in MMK held by the State Property Fund that accounts for 23.7 percent of MMK's voting shares. Factories owned by Rashnikov control about 60 percent of MMK's voting shares.

Another metals major, Yevrazholding, is considering closer cooperation in the sector.

Alexei Sevenyuk, executive director of Yevrazholding, said the company's negotiations with the Mikhailovsk Mining Co. and the state-owed Sokolovko-Sarbaisk company are at "a very developed stage." Mikhailovsk and Sokolovko-Sarbaisk are major suppliers of raw materials for MMK's iron production.

Yevrazholding, however, said the companies have no intention of using their proposed alliance to gain a competitive advantage.