Prime Minister Putin renews criticism of Mechel
Prime Minister Vladimir Putin has criticised Mechel, Russia's sixth-largest steel maker, for tax evasion. It's the second time in less than a week that the premier has publicly slammed the firm, and his comments sent its shares nosediving.
Last Thursday the company's stock plunged 38% in New York after Prime Minister Vladimir Putin slated the firm's pricing policy. Mechel regained 15% on Friday after saying it will cooperate with an investigation by the Federal anti-monopoly service.
Putin's latest comments sent Mechel's shares plummeting 30% on the RTS, and its ADR's fell 23% as the New York Stock Exchange opened on Monday. Putin said high domestic prices, including those for essential goods, are the result of monopolism and transfer pricing, stating,
One of the companies sells its products on the foreign market several times cheaper than it does at home. We discussed the need for creating a law about transfer pricing for a long time.
Arkady Dvorkovich, Presidential Aide, tried in vain to calm market nerves after investors dumped Russian stocks on Monday.
We will act in a civilised way on the market. We hope that the investigation conducted by the Russian Federal Anti-monopoly Service will correspond with all legal procedures.
The anti-monopoly service said Mechel could be fined one precent of its annual turnover if found guilty of fixing high prices for coking coal. But some analysts predict the outcome could be much more serious. Mining and Metals analyst, Marat Gabitov noted,
One of the possible outcomes for Mechel could be loss of control over the company by its major shareholder because there are a number of companies interested in this asset.
And the pressure is piling up on the steel and coal giant. Mechel is now being probed by the investigative committee of the public prosecutor's office.