Enes
Moscow
WINNER OF THE RF MINSTROY MEDIA COMPETITION 2016
Go to mobile

LATEST NEWS

11:48 27-04-2017
Slovenian investors set to build greenhouses, sports centers in Russia
10:58 27-04-2017
Huge Leroy Merlin store to be built in Russian city of Perm
10:40 27-04-2017
R-Pharm and Fujifilm to set up joint production of dietary supplements
10:19 27-04-2017
Xiaomi intends to open up to 20 new shops in Russian cities
09:53 27-04-2017
Gazprom considers gas production on shelf of Thailand and Cambodia
17:53 26-04-2017
Austrian authorities suspect Airbus CEO of $2-billion fraud
17:36 26-04-2017
Kamchatka’s priority development area to draw over $230m in investment
17:07 26-04-2017
NASA invents inflatable greenhouse for Mars and Moon
16:49 26-04-2017
Russian TVEL to supply fuel to Chinese companies for $1bn
16:29 26-04-2017
USA might start to export coal to Ukraine
16:16 26-04-2017
Gazprom plans to increase gas reserves by 469,9 bcm
16:01 26-04-2017
Construction of Eugal gas pipeline to begin next year
15:45 26-04-2017
Housing in Russia to become more expensive by 10-20%
15:06 26-04-2017
Japan studies Russian proposals to cooperate on Kuril Islands
14:53 26-04-2017
South Africa’s court cancels deal with Russia on NPP building
14:34 26-04-2017
Hungary to take part in Congress Hall construction for BRICS summit
13:41 26-04-2017
New entity for Islamic banking to be set up in Tatarstan
13:15 26-04-2017
Canada pledges to protect its domestic producers
12:57 26-04-2017
Rosnano to sign contract with Finns over wind farms building
11:24 26-04-2017
Russia reaches agreement with Boeing over Sea Launch program
10:33 26-04-2017
Russian escalator market might become world’s largest
09:42 26-04-2017
Chinese develop transport projects in Russian region of Leningrad
17:58 25-04-2017
Sales of new buildings in USA see 6% growth
17:49 25-04-2017
Moscow begins testing of Finnish electric bus of future
17:38 25-04-2017
Russia and Qatar consider joint projects worth $12 billion
17:07 25-04-2017
Why BIM technologies so popular in Finland
16:36 25-04-2017
French Minister pushes for sanctions against LafargeHolcim
16:03 25-04-2017
Russia plans to supply electricity to Ukraine’s breakaway region of Lugansk
15:47 25-04-2017
Chinese to build three metro stations in Moscow
14:33 25-04-2017
Tatarstan reduces cost of road construction, applying BIM technology
All news

ARCHIVE NEWS

«    April 2017    »
MonTueWedThuFriSatSun
 12
3456789
10111213141516
17181920212223
24252627282930

Reinforcement prices: some resort to blackmail, others do not react

logo russianconstruction.com
Reinforcement prices: some resort to blackmail, others do not react

Since the beginning of the year, the price of construction steel reinforcement has gone up two-fold. What will such a jump mean for the industry’s enterprises?

Having sharply increased the prices of rolled metal products and thus put small and medium size businesses in a most complicated position, metallurgists have fallen into their own trap. Such was the conclusion drawn by the participants of the “Mutually advantageous cooperation or price wars” round table, which took place at the RF Chamber of Commerce and Industry. They discussed the issue of price rises for rolled metal products in spring.

 

March madness

The history of the current strife between metallurgists and businessmen started this spring when rolled metal producers raised their prices three times.  

— All figures indicated that the Russian market for rolled metal is falling, but for the last half-year, prices for building bars grew by almost 100%, and sheet products by more than by 30%, Igor Sklyar, Chair of the RF CCI Committee on SME promotion, says.  This price jump was not precipitated by interior economic factors, and Russian rolled metal consumers were not ready for the situation.

According to the expert, due to the rouble devaluation, entrepreneurs were given an opportunity to increase their export capacity. However, the rolled metal price growth destroyed these hopes. 

— Metal-consuming equipment producers appear to be in a disadvantaged position as compared with their foreign colleagues - they have lost their competitive strengths, the “Altaivagon” JSC Deputy Director for Prospective Development, Stanislav Zolotarev, says.Production is now uneconomical. Neither can subsidies cover expenses. 

Equipment and metal furniture producers, and, of course, constructors are suffering most of all. The biggest price jump was registered for building bars. 

As “Kommersant” reports, the producers raised the price for building bars in Russia by 87%, and traders by 91%, between February and June. In dollar equivalent terms, a ton of bars on the internal market cost $434 in May, which is twice as much as in February, 2016.

— Metallurgists seem to know no limits, the Director General of the “SETISTROY” company, Petr Kapralov, told Construction.ru. — It is these bars that square meters “grow” from. And we cannot raise prices – the market will not pay them. So, get out of this mess on your own…

Reinforcement prices: some resort to blackmail, others do not react 

150 letters to FAS

It is no coincidence that the story became known via constructors - only the lazy ones do not speak of available housing. Issues of rental housing and wooden housing construction are being discussed at different meetings, and the RF President has charged the Government with developing measures on further mortgage loan rate decreases.

But all these measures will be in vain if housing costs goes up. According to experts, the cost of a square meter might grow by 1,500 – 2,500 roubles. Accordingly, flat prime cost will increase by 150,000 – 200,000 roubles.

Construction companies are stuck between a rock and a hard place. On the one hand, the demand is forcing them to decrease prices and, consequently, production efficiency. On the other hand, the growing associated costs are hitting production efficiency even more.  

Constructors could not withstand the “pincer” and are addressing different sources for help. As a result, official letters with demands to check the situation and the cartel agreement are flooding the RF Federal Antimonopoly Service.

The Kuban Area authorities appealed to FAS in May, to Irkutsk a bit later, then Khabarovsk and Udmurtia.

The “big guns” have joined in, in particular the Deputy Mayor of Moscow for Urban Development and Construction in the Government of Moscow, Marat Khusnullin, who says that metallurgists have entered a cartel agreement. At last, at the end of June, the RF Ministry of Construction resorted to FAS.

— From November, 2014 to June, 2016, about 150 claims on metal production prices growth came in to FAS, 20% of them in May and June, 2016, the Deputy Head of the Department for Industry Control at FAS, Andrei Britikov, announced. — All claims are examined, and the RF FAS has been charged by the RF Government and is checking prices.

However, the results of the work have not yet been seen. The thing is that such checks are carried out quarterly, meaning that the information on price growth in May-June will appear closer to August, and only by autumn might the Government be informed about the conclusions.

Reinforcement prices: some resort to blackmail, others do not react 

Is China to blame for this?

And what do metal producers say? They are referring to the world market.

— The metal production market is volatile and it depends on external factors, and our production is export-oriented, the Deputy Head of the Department for State Authorities’ Cooperation of “Severstal” JSC, Oleg Borisionok, complains. It is because steel production volumes surpass internal consumption by more than 50%.

According to the metallurgist, today China is the main indicator on the market. One of the reasons of rolled metal products’ world price growth is that Chinese producers have sharply decreased their export deliveries of these products.  

Prices have been growing since 2014, but there have never been such spikes on the market.  Rolled metal producers seem to have decided to reimburse their losses at the expense of internal consumers.  

— Metallurgists say that the inner market is falling but, relying on export Russian metal, producers have artificially created a rolled metal product shortage on the market, Elena Dybova, Vice-President of the RF CCI, said at the round table, and resumed: — Metallurgists are working in our country and must not destroy the internal market for the sake of profiting on the external market.

Reinforcement prices: some resort to blackmail, others do not react 

A little conspiracy theory

Round tables are, of course, very useful. Businessmen, officials, and metallurgists meet in private, let off steam, determine the problems, and suggest some solutions. But still, the event looks like one which had to be held: there is a conflict, there are many discontented parties, but there is no way out.       

A more important event took place earlier, and metal price growth in April to June is its expected result. The conference between Prime-Minister Dmitry Medevedev and metallurgists asked the Government for help but may not have received it is the event in question.

When the sharp price growth on the external market is spoken of, it is not mentioned that in May, for example, the EU raised the preliminary antidumping duty on cold-rolled mill products from Russia. The duty for the majority of companies is now 36.1% instead of the former level of 26.2%. The final decision will be taken in August, but even now the Ministry of Economic Development has evaluated metallurgists’ probable losses at as much as 1.1 bln roubles. Moreover, the Chinese producers leaving the European market will have an effect.

They are likely “to be gone” with the help of antidumping sanctions. The Ukrainians are happy now to increase imports on the free market. But the Chinese have left the internal market, and Russian producers have decided to gain results at the expense of the internal market, hence the sharp rise in prices and suspicion of agreement. Not having received support from the Government, metallurgists seem to have decided to make their point by any means necessary.

Thinking realistically, they are hardly planning to regain their potential losses on the internal market. It is clear that one cannot earn money like that without losing customers for good. It is blackmail.

Authorities are not reacting practically to the challenge. A series of meetings in different official establishments cannot be considered correct measures of reaction. The FAS is collecting information, which takes time, and then they will analyze it, then report to the Government…  Everything could have been done much faster if FAS had received the command, but the authorities probably decided not to interfere with the situation.

The story on the whole is not very good: some actors are blackmailing others, while some are pausing. Real constructors are suffering, and consequently, normal citizens are expecting available housing in vain.

Evgeny GORCHAKOV

 

Metal products prices growth

from February 1st to May 20th, 2016

 

Type of products

Producersprice growth

Traders’ price growth

Reinforcement

87%

91%

Hot-rolled sheet

22%

35%

Electric-welded pipe

33%

29%

Source: Metaltorg.ru

 

 

 

Related publications

PARTNERS

UP