NLMK requests to discuss the supply of transformer steel from Russia to China

China wants to close its market for transformer steel from Russia, by raising the import tax to 65%. As a result, Russian manufacturer - NLMK - may lose one of the major sales markets, which accounts for about 10% of this product exports.

NLMK addressed Ministry of Economics with the request to discuss issues about the supply of transformer steel from Russia to China at the upcoming meeting of the intergovernmental commission between the two countries. This summer the Ministry of Commerce of China launched antidumping investigation against Russian electrical steel in order to establish import tax amounting to 65.2%, which is essentially a fence measure.

In Russia, transformer steel is produced only by NLMK's subsidiary "VIZ-Steel." The aggregate production capacity reaches 250k tons (in 2010 it produced 195 k tons). This accounts to approximately 10% of the global market. For the past 20 years, China has been a key export market, accounting for up to one third of Russia's exports of electric steel. However, since 2006, China started the development of its own capacities. Over the past five years, production of transformer steel has increased by three and half times, reaching about 640 k tons. In parallel China has started replacing foreign competitors in its market.

In 2010, China introduced 6.3% import tax on NLMK’s electric steel, as well as on the products of two American producers: AK Steel Corp. and Allegheny Ludlum Corp. (7.8% and 19.9% respectively), suspecting them of dumping and determined the fee as the difference between sales on domestic markets for Chinese companies (the so-called dumping margin). According to the “Kommersant” newspaper, by the end of the year NLMK challenged the decision of the Beijing Ministry of Trade in the court trial, however so far no course of action has taken place.

Moreover, at the same time China launched a new investigation, suspecting NLMK in dumping margin of 65.2%. Revision of fees is also held for Korean, Japanese and American companies. The investigation should be completed by June 28th in 2012.