Russia’s Federal Antimonopoly Service on Wednesday announced it has opened an investigation into the pricing practices of two more mining companies as politicians struggle to keep a lid on soaring steel costs.

Just days after Prime Minister Vladimir Putin’s public attack on Mechel, the country’s largest coking coal producer, for alleged price-fixing and tax evasion, the antitrust authorities added Evraz Holding, which is partly owned by Kremlin-friendly businessman Roman Abramovich, and its affiliate Raspadskaya Coal to the companies being investigated.

The authorities, which opened a case against Mechel on July 15, said they were investigating whether the two companies had abused their dominant market position to charge steelmakers steeper prices for coking coal. Several of Russia’s steel companies produce coking coal, a key material in steel production.

Coking coal prices doubled between September 2007 and April of this year, said the regulator in a statement. It added that steelmakers Mechel and Evraz together with Raspadskaya together control 50 per cent of the market.

Evraz Group, which directly owns Evraz Holding, said it would fully co-operate with the authorities, but declined to make further comment. Raspadskaya Coal, which is part-owned by Evraz, could not be reached for comment.

Earlier, the regulator said Mechel and Evraz were artificially creating a shortage of coking coal on the domestic market by reorienting their output to export markets. It enabled the companies to hike prices by as much as 120 per cent, said the regulator.

Evraz rejected the claim, saying it exports less than one per cent of its coking coal output.

Government and business leaders have keenly debated the issue of rising steel prices in recent months, and analysts said it appeared the steelmaking lobby had managed to pin the blame on the coal producers.

“It comes down to whom has the greater lobbying power - the steelmakers or the producers of coking coal,” said Vladimir Zhukov, a metals analyst at Lehman Brothers. “It looks like the steelmakers have won.”

Russia’s soaring steel prices come at a time when the government is battling with inflation, which is running at an annualized rate of more than 15 per cent. Efforts to slow price increases have so far proven ineffective, threatening to undermine Russia’s eight-year economic boom and dent the government’s popularity.

Some analysts have suggested Putin’s assaults on Mechel are connected with his efforts to influence inflation.

In a report issued Tuesday by JPMorgan, the bank’s strategists voiced concerns that Putin’s criticisms introduced “the risk that non-conventional methods may be used to control inflation.”

Putin’s attack on Mechel wiped nearly $8 billion off the company’s value in the following days, leading a decline across the board in Russian stocks. Attempts by government officials this week to reassure the markets appeared to seep through to the market Wednesday, and the MICEX was up by 3.3 per cent as of mid-afternoon.

source news : canadian press

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