OREANDA-NEWS  On 02 March was announced, that over three months (November 2008 - January 2009) of performance under the conditions of the Memorandum of Understanding signed in November between the Cabinet of Ministers and Ukrainian mining and metals enterprises, Metinvest Group lost USD 119.9 mln as it reduced iron ore raw materials price for Ukrainian consumers.

Metinvest Group cooperates with a number of Ukrainian iron ore raw materials consumers, in particular Zaporozhstal, Ilich Steel Plant, and the IUD on basis of long-term three-year contracts signed at the end of December 2007. 

These contracts stipulate that the price must be set with regard to the change index of the global market price for concentrate, which is traditionally in use from the 1st of April. This approach meets the world's best practices.

As the price of rolled metal rocketed in the 1H 2008, these contracts ensured excellent financial performance. The situation worsened notably in the 2H 2008, when the demand tumbled resulting in rolled metal price slumps.

Given the challenging economic situation in the M&M sector, the company decided to satisfy the requests of Ukrainian customers and observe recommendations of the Cabinet. Since November 2008, Metinvest switched to the system of monthly approval of additional conditions for long-term contracts to keep pace with the fluctuating market. In particular, the contractual price of one tonne of concentrate was halved from USD 120 per tonne to USD 55-50.

Metinvest lost USD 119.9m over three months (November 2008-January 2009) of performance under the conditions of the long-term contracts because of low prices for iron ore raw materials. Specifically, it lost USD 12.2m under the contract signed with Dzerzhinskiy Dneprovskiy Steel Plant; USD 49.7m - with Alchevsk Steel Plant; USD 26.2m - with Zaporozhstal; and USD 31.8m -  with Ilich Steel Plant.

"We believe that subsidizing the whole mining and metals industry will help Ukrainian enterprises outlive the challenging period of economic instability”, said Igor Syry, Chief Executive Officer of Metinvest Holding. “At this time of global crunch, we think it is necessary to help all M&M enterprises even if it contradicts our interests. Amid the financial crisis our paramount objective is not only to retain highly-skilled staff of M&M Ukrainian companies and ensure conditions for a rapid return to our former positions in the market, but to improve those positions considerably”.