Ministry, metal producers agree on price ceilings for coming months - sources

MOSCOW. March 16 (Interfax) - The Russian Industry and Trade Ministry and metallurgists have agreed price ceilings for metals for the coming months, while for some enterprises there may be exceptions taking into account the cost of producing them, several sources familiar with the outcome of a meeting between the ministry's head, Denis Manturov and the shareholders and top management of metallurgical enterprises on Wednesday told Interfax.

Price proposals "will be advisory in nature," one of the sources said.

An agreement was also reached to limit the margins of dealers, which should reduce prices for the domestic market.

Pricing linked to costs and a mark-up of not more than 20%-25% was discussed at a meeting between Deputy Industry and Trade Minister Viktor Yevtukhov and representatives of ferrous metallurgy companies last week, but one of the sources said this issue was not raised at Wednesday's meeting.

The ministry said on Monday that it proposed to decouple prices for metals and raw materials for their production on the domestic market from the U.S. dollar.

"It is necessary to ensure the uninterrupted functioning of the industry by decoupling prices for metallurgical products and raw materials from the dollar exchange rate. To do this, the Industry and Trade Ministry proposes to temporarily set the maximum admissible prices for certain types of mineral resources in the domestic market. This will help to prevent an excessive rise in prices for the resources themselves, as well as for end products in the domestic market. In addition, this measure will help to maintain the pace of implementation of investment projects and the construction of federal and regional facilities," it said.

The ministry again drew attention to still-high prices for raw materials like iron ore and coking coal, and for ferrous scrap, and also said that aluminum and copper products are subject to the influence of exchange rate fluctuations.

Yevtukhov said last week that metallurgical companies should limit their mark-up to 25% of the cost of production and, if necessary, renegotiate this year's contracts with all industrial enterprises. Russian government will set prices for metallurgical products unless metallurgical companies propose discounted prices and profit margins in the near future, he said.