Translated material
Price barrier
Metallurgists can drive the Russian defense industry into a dead end
One of the most pressing problems of the Russian defense industry in the near future will be the rise in prices for metal products. Some leading metallurgical enterprises in Russia have significantly increased selling prices since the beginning of April. In April alone, the products of Evraz Group, Severstal, Mechel, Magnitogorsk and Novolipetsk Iron and Steel Works, as well as other manufacturers, increased in price by 45%. Prices continue to rise. For the defense industry, this trend is fraught with serious problems. After all, this industry, which is strategically important for the country, is very metal-intensive. A significant part of it consists of companies engaged in heavy engineering.An increase in metal prices leads to an increase in the price of machine and technical products of defense plants. This, in turn, jeopardizes defense orders and reduces the competitiveness of Russian weapons in foreign markets. But metallurgists brush aside all reproaches and blame the rising prices of raw materials. Although in fact, metallurgical companies are provided with their own raw material base, experts believe, so they have no objective basis for such a price increase.
“The rise in metal prices directly affects the execution of the state defense order,” a member of the General Council of Business Russia, General Director of OJSC Ompo Radiozavod im. A.S. Popov" Ivan Polyakov. -- The price growth indicators recommended by the Ministry of Economic Development and Trade are mandatory, in particular, for the Ministry of Defense, but do not correspond to the realities of the economic situation in the country. With the 8% increase in metal prices recommended by the Ministry of Economic Development and Trade and taken into account by the Ministry of Defense, in reality we have a fourfold increase in prices.”
According to Mr. Polyakov, today internal capabilities and previously made purchases allow us to keep the final cost of products in this price range, but the accepted estimates, inflation rates and forecasts of the Ministry of Economic Development and Trade, which defense enterprises are guided by, do not correspond to reality. And in these conditions, not only the defense-industrial complex, but also other industries are waiting for a correct forecast, and not “wishful thinking.”
By the way, it is not only the defense industry that is outraged by what is happening on the metals market. The Association of Russian Automobile Manufacturers recently appealed to the Federal Antimonopoly Service (FAS) with a demand to investigate the activities of steel producers, accusing them of a cartel agreement. Previously, a similar demand was sent to the FAS by the head of Surgutneftegaz Bogdanov, as well as the Gazpromneft company and the Pipe Industry Development Fund. Those who applied also demanded that metallurgical companies comply with antimonopoly legislation by taking measures provided for by law, and in particular, increasing export duties on metal, which would prevent a sharp, one-time and unjustified increase in prices for raw metal, pipe billets and strips.
Meanwhile, last week, Russian Prime Minister Viktor Zubkov held a meeting on issues of the defense complex, where he stated the need to “establish uninterrupted production of high-tech competitive products” for knowledge-intensive industries, to which he includes the defense industry, the rocket and space complex, nuclear power engineering, aircraft manufacturing, shipbuilding.
According to representatives of the defense complex, in order to solve the problem set by the government, it is necessary to establish high export duties on iron ore and rolled metal, similar to the existing duties on oil. “The state must intervene in the situation by regulating metal prices for consumers in the domestic market. Countries such as Norway, the UAE and Saudi Arabia do not trade on domestic markets at world prices, to the detriment of the national economy,” noted Ivan Polyakov.