Novolipetsk Steel, Russia's fourth largest steel producer, has signed a one-year contract with the country's biggest car maker AvtoVAZ to supply 175,000-195,000 tons of rolled steel to the auto giant, Kommersant business daily reported on Thursday, quoting sources close to the firms.
From April 2011, Novolipetsk Steel will supply AvtoVAZ with 12,000-13,000 tons of cold-rolled steel and 2,500-3,000 tons of zinc-coated rolled steel per month, a source told Kommersant. The companies declined to comment officially , but an AvtoVAZ top manager has confirmed to Kommersant that Novolipetsk Steel will replace Severstal's rolled steel shipments to the auto giant and that the price of steel "is lower than the price set by Severstal and suits both parties."
At the end of 2010, AvtoVAZ lodged a complaint with the Federal Antimonopoly Service (FAS) against Russia's largest steelmaker Severstal, which currently supplies AvtoVAZ with 60% of its rolled metal, for boosting prices by 30%. Severstal has said it had to increase prices because of rising international raw materials prices. The FAS did not uphold AvtoVAZ's complaints and found no violations by Severstal then.
AvtoVAZ has announced that it plans to cut rolled steel purchases from Severstal by 75% while the steel producer has said it may reduce supplies to the auto giant by 50%, from 200,000 tons to 100,000-120,000 tons.
Magnitogorsk Iron & Steel works, another key supplier for AvtoVAZ, has said, however, it will be unable to boost rolled steel supplies to the auto giant because its production capacity are fully loaded. Therefore, Novolipetsk Steel has remained the sole metals plant in Russia that can meet AvtoVAZ's requirements for rolled steel, the paper said.
Novolipetsk Steel previously had a contract with AvtoVAZ but cancelled it in 2009 over payment delays, the paper said.
VTB Capital analyst Vladimir Bespalov told the paper that the basic price of steel might be close to market prices because the deal was initiated by AvtoVAZ but the steel producer could offer a discount because AvtoVAZ had been in the focus of the government's measures to prop up the auto giant.
The contract with AvtoVAZ is of interest for Novolipetsk Steel because it may boost the steel maker's steel supplies to the domestic market, Kommersant quoted Renaissance Capital analyst Boris Krasnozhenov as saying.
A top manager of a Russian metals company has said, however, that partnership with AvtoVAZ would not bring any tangible benefits for Novolipetsk Steel because "these contracts are more social in nature than commercial".
MOSCOW, February 24 (RIA Novosti)
