Ore for the new Russia
In early March, the Deputy Chairman of Russian government Dmitry Kozak held a meeting with representatives of industry groups, said a source in the steel market. In particular, it was attended by representatives of holdings “metalloinvest” Alisher Usmanov and “Severstal” Alexey Mordashov. At the meeting, according to the source , discussed the supply of iron ore to the enterprises of the self-proclaimed Donetsk and Lugansk national republics (DND and LNR).
“The company expressed readiness to begin deliveries to the enterprises of the Republic in the near future,” added the source.
Another source close to one of the holdings, confirmed that the meeting was held, and the participants “were asked to pay attention to a new market”.
Iron ore to stopped because of the war and the blockade of the railway communication to all major metallurgical plants of the region Yenakiyevo and Makiivka metallurgical plants (included into group “Metinvest” Rinat Akhmetov) and Alchevsk metallurgical plant (a part of ISD, owned by Russian investors) is supplied to the enterprises of the holding “System capital Management” Rinat Akhmetov. The quality of raw materials used Inguletsky, Central and Northern GOK, located on the Kiev-controlled territory.
Mining of iron ore in career Glavatska Central GOK
Photo: Alexey Boldin / Ins “Ukrainian photos”
Need yenakiieve and Makiivka plant (located on the territory of the DNI) is about 2.6 million tons of ore; Alchevsk metallurgical plant (located in LC), and another 1.6 million tons, estimates the analyst of Ukrainian investment company Concorde Capital Oleksandr Parashchiy. Another consumer of the ore — plant Donetskstal has been underutilized for the past year and bought only a few tens of thousands of tons of ore, adds steam.
“Severstal” in 2016, consumers have shipped 14.9 million tons of iron ore. Russia’s largest supplier of iron ore metalloinvest in 2016 produced 40.7 million tons of raw materials.
“The fact that the desire of Russian companies [to supply iron ore to companies in Donetsk] is, this is obvious. But to discuss it in public too early,” — said the Plenipotentiary representative LNR in Minsk group Vladislav Dine in response to the question about possible agreements with “metalloinvest” and “Severstal” on supply of iron ore.
In “Severstal” and the office of Dmitry Kozak, declined to comment. “Metalloinvest” has failed to respond to the request within two days.
Logistical problems with the supply of iron ore from Russia to unrecognized republics should arise, the Director of corporate ratings ACRA Maxim Hudalov. There are at least three Railways that link the DNR and LC with Russia and are under the control of the unrecognized republics, he said.
This way Matveev — Kurgan — Amvrosievka, Gukovo — Anthracite, Millerovo — Lugansk, lists the Professor of the Russian Academy of foreign trade, Andrey Darling. All these ways, he says, theoretically ready for transport of industrial goods from Russia. Traditionally, these global loads are carried, there went the passenger train, but in Gukovo, for example, has powerful sorting station, adds Blu.
The DNI has the ability to import and export manufactured goods through the railway in Ilovaisk, said a source close to the leadership of the Donetsk railway. “In 1991 it was the main road linking Ukraine with the Caucasus. Since then, volume has fallen four times, but the canvas is in good condition and able to transport there,” — said the source .
According to the source, to provide a maximum bandwidth of up to 13 trains a day, it is necessary to allow the movement of trains at night. The necessary rolling stock and repair facilities are available to the authorities of Donetsk and part of the railway leading to Ilovaisk, protected from the fighting. “Is all about political will and agreements,” concludes the source. Darling believes that 13 trains a day is a bit to industrial hub. Usually such regions load is two trains per hour.
Unrecognized republics will have to finish building the railway, political analyst Roman Manekin. Donetsk railway is the largest in Ukraine, but after the departure of the militia Igor strelkov from Slavyansk and Kramatorsk major railway junctions remained on the territory controlled by Kiev, recalls the Manekin. “Hence the need to rebuild the railroad. Or to recapture the territory of Donbass. Both, of course, affect the real cost of the final product.”
Traders will take advantage of the plight of enterprises, the DNI and the LC and increase the cost of iron ore, but given the small distances to the main deposits of “metalloinvest” the price will be acceptable, says Hudalov. In his opinion, most successfully from the point of view of logistics to the DNR and LNR are located iron ore plants “metalloinvest” (Mikhailovsky and Lebedinsky GOKs), NLMK and group “coke”.
Source Metinvest binds to a meeting of Russian Industrialists have Kozak with the blockade of railway tracks by the Ukrainian authorities. The blockade of the ways veterans of the antiterrorist operation (ATO) began on 26 January in Luhansk region, and later spread to Donetsk region. ATO veterans protested against smuggling through the line of contact.
The blockade of the DND and LNR responded with the introduction of external management in private enterprises of the region. On February 27 head of the DND and LNR Alexander Zakharchenko and Igor Plotnitsky declared about the possible nationalization of all enterprises located on the territory of the republics, but registered in Ukraine. The introduction of external management at the enterprises of the Ukrainian jurisdiction in DND and LNR began from midnight on 1 March.
“For us it is a forced measure due to the economic blockade by Ukraine, which runs counter to the Minsk agreements and that only intensified the blockade of the railway communication that led to the suspension of major industrial enterprises”, — said the Chairman of the people’s Council DND Denis Putilin.
According to him, the interim management did not violate the right of ownership and will help save tens of thousands of jobs and production capacity. Now the leadership of the DNI is responsible for the operation of these enterprises staying run factories and the development of crisis management procedures, concluded Pushilin.
Decrees of the heads of DND and LNR remain largely a formality, and strong changes in the operation of the plant is not felt. All enterprises of “Metinvest” on the uncontrolled territories of Ukraine are controlled by the managers of the holding, told close to the management of the holding source. The senior and middle management went on the Ukrainian direction, and operational administration is performed by the remaining supervisors. “Sometimes companies just communicating people come with their arms and sit at the entrance, this is called external control. They can’t all disperse and to hire new staff” — described the situation a source in the “Metinvest”.
Photo: Alexander Ryumin/TASS
DTEK [an energy subsidiary of Akhmetov’s holding company] on the uncontrolled territories of Kiev are operating normally, said communications Director of DTEK Energy Irina Miliutin.
Interviewed staff of Zasyadko coal mine said that representatives from DND and LNR asked the miners to sign a paper about the device in the enterprise. Why do it themselves miners and workers in other businesses do not know. “Yes we do, didn’t say anything, got a salary and work. What’s the difference?” — said one of the workers of the Donetsk electrical plant.
In the ministries of coal and energy DND and LNR, which, according to the decree, controls the companies of the DTEK group, refused to comment on the situation . “The situation is difficult, we do not fully understand how to operate and grow these businesses,” — said a source in the Department. According to him, the resolution of all issues will take up to two months.
How to avoid sanctions
Deliveries of Russian manufacturers companies in the DNI and LC is fraught with risks of sanctions, according to Maxim Hudalov of an ACRE. “Companies have foreign assets and liabilities, and given the high level of protectionism on the steel market in Europe and the US, local producers will take the opportunity to ban the export from Russia under any pretext,” he said.
The most likely option Hudalov sees small-scale traders who would have bought party ore at the enterprises of Russia and has sent it to companies of the breakaway republics.
Republic of Donbass recognized South Ossetia, respectively, the supply of raw materials and sales of finished products is carried out through the Republic, said Pushilin. To save on the companies jobs, you need to provide them with raw materials, and provide sales, agrees Dana. “There is complete dependence on Russian markets, as well as South Ossetia”, — said the representative LNR.
With the participation of Irina Parfentyeva, Sergey Vitko and Dmitry Okrest