2nd UPDATE:Russia Antitrust Body Opens Case Vs Metals Producer
June 01 2010 - 12:22PM
Dow Jones News
Russia's antitrust regulator has launched an investigation into
metals producer OAO Chelyabinsk Zinc Plant (CHZN.RS), as it steps
up action against some of the country's biggest companies for
abusing their dominant market position.
London-listed Chelyabinsk Zinc Plant, which controls more than
60% of the Russian market and 2% of the global market, said Tuesday
in a statement it is being accused of abusing its dominant position
by setting different prices for Russian and foreign customers "that
could not be substantiated on economic, technical or other
grounds."
Russia's Federal Antimonopoly Service, or FAS, also started a
probe into a unit of U.S. aluminum giant Alcoa Inc. on Monday,
accusing it of price hikes.
Rising prices in the metals sector have become a major issue in
Russia in recent weeks. FAS said last week it had started an
investigation into steel producer Evraz Group SA (EVR.LN), which is
partly owned by billionaire Roman Abramovich, for possible price
manipulation on some products, causing the company's share price to
fall by 4.8%.
Complaints have come from producers of railroad cars and
automobiles, as well as from oil and gas companies worried about
the rising costs of steel used in pipelines.
The investigation will likely be broadened to include other
Russian metallurgical companies such as Magnitogorsk Iron &
Steel Works (MAGN.RS), OAO Severstal (CHMF.RS) and Novolipetsk
Steel OJSC (NLMK.RS), Moody's rating agency said in a research
note.
"There is a risk it could signal the government is planning to
intercede in the market," Moody's said, adding that the news is
damaging for the companies' reputations and may hurt credit
ratings.
Chelyabinsk Zinc Plant said it intends to cooperate with FAS.
Its shares were trading 4.9% lower at $3.33 in London.
Prime Minister Vladimir Putin met steel producers and consumers
on Monday to seek a compromise.
In July 2008, Putin criticized OAO Mechel billionaire
shareholder Igor Zyuzin for the pricing of raw materials in Russia,
sending the company's shares down 38%.
FAS, which was created in 2004 to regulate industries that
haven't been liberalized since Soviet times and are dominated by a
few companies, has had difficulties upholding claims against the
country's biggest companies.
The agency has generally been seen as a weak government body,
but Putin has said repeatedly that it should use its authority more
actively.
Last week, Russia's High Arbitration Court supported claims by
FAS against TNK-BP Ltd., the country's third largest oil company
which is half-owned by U.K. oil major BP PLC (BP), to pay a $35
million fine for fixing wholesale prices of some oil products.
TNK-BP and other oil producers such as OAO Rosneft (ROSN.RS) and
OAO Lukoil Holdings (LKOH.RS) have so far managed to successfully
challenge claims in local courts. But analysts believe that last
week's ruling may support claims against oil companies totaling
around $1 billion.
State-controlled Rosneft, Russia's biggest oil company, is
seeking to settle claims by the antitrust regulator out of court,
local media reported. The company was hit with a fine of nearly
$170 billion, which it challenged in court. Rosneft declined to
comment on the reports.
-By Jacob Gronholt-Pedersen, Dow Jones Newswires; +7 495 232
9197; jacob.pedersen@dowjones.com
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