Russia's Federal Antimonopoly Service looks at coking coal market

Russia's Federal Antimonopoly Service, which has launched an investigation into 3 coking coal producers, accused of breaking antitrust laws. The move follows a turbulent week on the Russian markets for big metals companies.

Coking coal – a basic fuel used in the steel industry – has attracted the attention of the Federal Antimonopoly Service. Coke prices have doubled in a year, causing steel and pipe producers to cry foul. Starting with Mechel last week, and moving on to Evraz and Raspadskaya on Wednesday, the Service has begun looking into coal price policy on domestic and foreign markets.

It has accused the three firms of violating competition laws. And the FAS has proposed handing out long jail terms for managers of firms found guilty of anti-competitive behaviour, with Deputy Chief Anatoly golomolzin saying they’ve been looking at the issue since May.

Since May, we have been analyzing the coal sector and these 3 companies, representing more than 50% of the coal market, are accused of abusing their dominant position.

If an agreement to boost prices is proved, the companies could be fined between 1 and 15% of last year’s revenues.

Evgeny Ryabkov, Deputy Director of Research at Antanta Pioglobal believes the government is looking to change the way it manages the coal market.

The government tried to cool down the overheated coal market by introducing export duties, but now it’s found a different way. Coal producers and customers will have to conclude long-term contracts to provide stable and transparent prices. This system is already used on the foreign markets.

News of the probes, and criticism of coal firms by by Prime Minister Vladimir Putin, caused shares in the metal and coal sector to slump on the markets.

Mechel alone has lost 33% of its market value since last Thursday. Shareholders fear the companies may face further sanctions. However first deputy prime minister Igor Shuvalov said companies have nothing to lose if they become more transparent.