Russia’s government looks set to introduce a national commodities and goods pricing regime as the country’s economy takes a hit from Western sanctions.
Russian deputy industry and trade minister Evgeniy Evtukhov told steelmaker, trader and scrap procurement firm representatives during a 10 March meeting that domestic steel prices – which he cited at RUB 75,000/tonne ($558/t) – are unacceptably high and need to be lowered. The formula that the ministry has offered to producers is cost of production plus around 20-25% maximum, with traders’ margin set at “3-5-7%”, Evtukhov said at the meeting, a recording of which was obtained by Kallanish. Companies were given several days to come up with their exact numbers.
Any attempt to increase prices any higher, use additional middlemen, or refuse to comply would be passed on to appropriate departments for further action. Those traders who do not agree to the terms are welcome to close their business, even if leads to bankruptcies, Evtuhov is heard as saying. Prices in export markets will however not be regulated.
The deputy minister, answering questions from representatives about feedstock prices, explained that every single extractor and producer will be following this formula, so there should be a reduction in prices throughout the whole chain. These meetings have also apparently been held with other industries’ representatives, including food.
Evtuhov told representatives that this regime was likely to last for several months. He also noted that a reduction in output in order to increase cost of production will not be tolerated. Steelmakers are also expected to carry on with their modernisation plans, even while they are earning less. “You had a very good last year; I am sure you can continue with modernisation plans for a while using these resources,” he concluded.