FAS wants to harden Ural Steel

The department has new claims against Denis Safin’s company.

The FAS opened another case against the plant, the owner of which at the beginning of 2022 was the Zagorsk Pipe Plant. This time, the department saw a sharp and, in its opinion, unreasonable increase in prices for bridge-building steel. An enterprise located in the Orenburg region faces a turnover fine.

“Analysis of the organization’s economic performance indicators showed that, in conditions of cost reduction, the company increased the price of these products (we are talking about the 10HSND and 15HSND brands used in the construction of bridges.). From February to June 2022, the growth was more than 70%. If guilt is established, the organization faces a fine in accordance with the Code of Administrative Offenses of the Russian Federation,” the Federal Antimonopoly Service reported recently.

The department explained that, according to the results of a competition analysis, Ural Steel JSC occupies a dominant position in the bridge steel market, its share exceeds 50%. In total, according to the industry agency Meta*ls & Mining Intelligence, the annual volume of the Russian bridge steel market is estimated at 400 thousand tons. At the same time, according to the Rusmet agency, hot-rolled steel in Russia in the first half of 2022 fell in price by 40%. This situation arose due to the strengthening of the ruble against the dollar, the loss of access to the products of Russian metallurgists to the European market and, as a result, a drop in demand and increased competition in the domestic market.

Words and deeds

Ural Steel is a full-cycle metallurgical enterprise located in Novotroitsk, Orenburg region. It includes coke and blast furnace production, electric furnace melting, sheet rolling and other workshops. Previously, the metallurgical plant belonged to Alisher Usmanov’s Metalloinvest. In February 2022, after lengthy negotiations (the parties had been discussing the deal since 2020), Ural Steel was bought by the Zagorsk Pipe Plant (ZTZ), a supplier to Gazprom. The purchasing company does not disclose information about its owners. According to TASS, in 2021 the majority shareholder of ZTZ was its CEO Denis Safin. The amount of the transaction with the previous owner of the Novotroitsk plant was estimated at $500 million. It was assumed that the plant would become the main production site for the new ZTZ project for the production of seamless oil-grade pipes.

“We will significantly expand our capabilities and go beyond the production of our traditional pipe products. ZTZ plans to continue to develop the plant and increase the efficiency of its production. “Ural Steel will fulfill all contractual obligations to existing Russian and foreign consumers of its products as planned and in full,” Denis Safin said then.

However, apparently, words did not match deeds, and after the change of owner and management at the enterprise, the style of doing business clearly changed. This is evidenced by claims from both the supervisory agency and the metallurgical plant’s counterparties.

Ruble punishment

Read more:How and where do Russian companies export Ukrainian grain?

In 2023, the FAS already initiated a case against Ural Steel on grounds of violation of clause 1, part 1, article 10 of the law “On the Protection of Competition.” Then the department found out that since the end of 2022, the increase in prices for round continuous-cast wheel blanks of grade 2 and grade T, used for the production of solid-rolled railway wheels (for freight cars, shunting locomotives and electric trains) amounted to more than 40%, despite the fact that their cost output during this period changed slightly. Then, in accordance with the Code of Administrative Offenses of the Russian Federation, if guilt was established, the enterprise faced a turnover fine on the proceeds from the sale of goods. The completion of the proceedings in this case has not yet been announced.

And it was not for nothing that we mentioned the statement of the new management of Ural Steel about “fulfilling contractual obligations to existing Russian and foreign consumers of products.” In January of this year, “Our Version” told how exactly these contracts are fulfilled - in no way. Among the affected companies were AsiaTyazhMash LLP from Kazakhstan and the Russian SVM Project LLC, which entered into contracts with Ural Steel JSC for the supply of foundry products back in 2019-2020. The situation looked like that after the change of owner and with the arrival of new management in the management of the steel plant, three months before the end of the contract, Ural Steel simply stopped fulfilling its obligations.

It was not possible to resolve the situation through a claim procedure, and the counterparties had to seek justice in the courts. Oddly enough, the judges sided with the defendant and refused to satisfy the plaintiffs’ claims, for some reason completely ignoring the clause in the contracts stating that “if the supplier refuses to supply the goods for reasons beyond the control of the buyer, with the exception of force majeure circumstances provided for in this agreement, the buyer has the right to impose a fine on the supplier in the amount of 40% of the cost of the goods agreed upon by the parties in specifications and/or additional agreements.” And these are far from the only victims of the “original” business methods of the new management of Ural Steel.

And now another antitrust case completes the picture. The company again faces a turnover fine of up to 2% of total revenue for the year preceding the discovery of the violation. According to the public financial report, the revenue of Ural Steel JSC for 2023 amounted to 162 billion rubles, an increase of 13% compared to 2022 (143 billion rubles). Based on these figures, the amount of the turnover fine in the new antimonopoly case could reach 3.2 billion rubles.