By John Helmer, Moscow

Tethered high above Victor Pinchuk’s newest steel smelter at the Interpipe plant, visible for miles around the eastern Ukrainian city of Dnepropetrovsk, is a large balloon. It’s meant to symbolize what the Interpipe website is calling the smelter’s state-of-the-art technology — “the construction plant has no harmful effect on the atmosphere or social surroundings”; also its historical uniqueness in the steel industry west of the Russian border – “a vital step in the development of the domestic Ukrainian pipe industry.” For the curious and for asthmatics, Interpipe is offering guided tours of the plant to demonstrate how it “marks the beginning of a green era in the metallurgical industry.” The plant’s press office says the balloon construction is called Sun Interpipe. “It’s an art object, and we are not going to remove it.”

Less intentionally, the balloon symbolizes the sky-high cost of building the smelter and supplying it with electricity; Pinchuk’s growing billion-dollar debts; and the collapse of demand for the steel products Pinchuk is offering for sale in Ukraine and Russia, Interpipe’s make-or-break markets.

Although Interpipe remains privately held by Pinchuk, documents the company has prepared with his bankers to cover his debts, together with bank sources, reveal how strapped for cash Pinchuk is. The balloon is also going up for Pinchuk, as he tries to raise at least $143 million, perhaps ten times as much, from a claim filed in the UK High Court against two rival Ukrainian metals magnates, based on recollections of meetings Pinchuk and the others held in the Ukraine, Israel, Sardinia, and Switzerland, starting nine years ago.
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by John Helmer - Thursday, May 23rd, 2013
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By John Helmer, Moscow

There has been no movement in Evraz’s proposed sale of its South African unit, Highveld Steel & Vanadium, to Nemascore, a special purpose vehicle created in February by a black empowerment enterprise linked to South Africa’s President Jacob Zuma (right). The deal for $320 million was announced by Evraz in March. At the time, the transaction was reportedly to be financed by Russian state bank VTB at a price which was more than double the market value of Evraz’s 85% stake in the company.

Subsequently, the Industrial Development Corporation (IDC), the SA Government’s business stakeholder, said it was not involved in providing VTB with repayment guarantees to facilitate financing for Nemascore’s purchase. Neamscore’s directors have refused to discuss the deal, say where the money is coming from, or explain it in light of Highveld’s lossmaking and other troubles last year.
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by John Helmer - Wednesday, May 22nd, 2013
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By John Helmer, Moscow

Roman Abramovich (left) landed in Hong Kong on Tuesday afternoon. Abramovich is an influential shareholder in Norilsk Nickel, Russia’s largest mining and metals company, on whose dividends the loss-making United Company Rusal now depends to stay out of the red. Rusal is the Russian aluminium monopoly, but Hong Kong is home to Rusal’s share listing, and its dwindling share price. According to the latest Rusal financial report, the company ran a $47 million loss in the quarter to March 31. Adding $99 million of its share of Norilsk Nickel’s profit put Rusal’s red line into the black by $52 million. But for the annual general meeting (AGM) of Rusal shareholders to consider such matters, Abramovich is 24 days early. The Rusal AGM is scheduled at the Grand Hyatt Hotel in Hong Kong, at 10 in the morning of June 14.

At this meeting, a director on the Rusal board, Elsie Leung Oi-Sie (right), is facing a vote of no-confidence. A parallel motion proposes her replacement by a Russian candidate, Dmitry Vasiliev. The moves have been initiated by the 15.8% shareholder bloc of Victor Vekselberg and Len Blavatnik for reasons reported here. They may be supported by Mikhail Prokhorov with his 17.02% of the Rusal shares; his spokesman said today it’s too early to announce how he will vote. If counted together, the vote against Leung may start with almost 33% of the shareholder votes. Another 10.03% of Rusal’s shares are classified as a public float, according to the company website. The largest part of that, 3.15%, was acquired at the initial public offering (IPO) by the state bailout bank, Vnesheconombank (VEB).
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by John Helmer - Wednesday, May 22nd, 2013
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By John Helmer, Moscow

If you are looking for Gennady Timchenko (second from right), the dominant Russian in the partnership which created the oil trader Gunvor, you won’t find him in the market prospectus Gunvor has just released to the market. That’s because the document, dated May 10, 2013, spells his name Guennadi Timtchenko.

The prospectus for $500 million in bonds is the first to be issued to the market by the hitherto secretive Timchenko and his partner, Torbjorn Tornqvist. Prepared by Credit Suisse, Goldman Sachs, ING and Societe Generale, the document says Timchenko and Tornqvist own the group 50/50. But the prospectus isn’t a prospectus in Switzerland because in that country, Gunvor can “not claim to comply with the disclosure standards of the Swiss Federal Code of Obligations and the listing rules of the SIX Swiss Exchange Ltd. and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange Ltd.” The prospectus can be read in full here.
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by John Helmer - Monday, May 20th, 2013
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Hong Kong
May 17, 2013: 0850

Dear Mr. Helmer:

I have no wish to comment on whatever article you wished to write, but since you have put it to me and I have to disagree with you in many of the statements made, in particular:
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by John Helmer - Thursday, May 16th, 2013
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By John Helmer, Moscow

So far Elsie Leung Oi-Se has been paid $632,000 by United Company Rusal to listen attentively, read carefully, and speak her mind at meetings of the main board of directors, and also the audit committee of the board. Rusal titles her an independent non-executive director. She is one of five of those on the 18-member board; one of the 5-member audit committee. According to her company biography, she is a lawyer by training and career. She has also been a politician in the Hong Kong government, the equivalent of minister of justice.

First appointed to the Rusal board on November 30, 2009, when the company’s application to be listed on the Hong Kong Stock Exchange was running into difficulty, she was paid $16,000 for one month’s work. In 2010 she was paid $199,000; in 2011 $209,000; and in 2012, $208,000. She is the lowest paid of her peers, the other “independent non-executive” Rusal directors.
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by John Helmer - Thursday, May 16th, 2013
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By John Helmer, Moscow

Arkhangelskgeoldobycha (AGD), the LUKoil diamond-mining subsidiary, has made its first detailed presentation of the new mine it is building in Arkhangelsk, with confirmation of the new mine’s diamond grades, volume of production, and financial value. The Grib mine, named after the Russian geologist who first found the deposit, is the first major diamond source to start production in Russia in several years, and the first to be developed independently of the state miner, Alrosa. As chief executive Maxim Mescheryakov, AGD’s chief executive, told a Toronto, Canada, audience, the presentation is designed “to show that we exist; that we are big; and that we commence production this year, fourth quarter. We are talking about 4 million carats delivered to the market annually.”
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by John Helmer - Wednesday, May 15th, 2013
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By John Helmer, Moscow

It’s not a good time to be a steelmaker — not if you are in Russia, not if you are in China, and certainly not if you are in the US or the European Union. But if mining manganese, the vital steel-hardening alloy, is what you do for a living, the coming three years look likely to transform worldwide control, as Russians reach self-sufficiency in manganese supply for the first time; and as a prominent Ukrainian prepares to share a large corner of the global market with the Chinese.

The reason that manganese can prosper while steel is in the doldrums is because almost all of its application is to steelmaking; and because “manganese has no satisfactory substitute in its major applications”, as periodic US Geological Service reports point out.

The new Russian manganese supply is coming from the little-known Siberian Mining and Metallurgical Company (SGMK), controlled by Alexander Rybkin, a former executive of the Evraz steel group. Rybkin’s influence is provincial, limited to his partners – the Evraz group, which has first call on SGMK’s new manganese supplies for its Kemerovo steelmills at Novokuznetsk; and the governor of Kemerovo region, Aman Tuleyev. Until now they have made SGMK’s manganese a captive of Evraz’s demands.
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by John Helmer - Tuesday, May 14th, 2013
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By John Helmer, Moscow

“I have always been fond of the West African proverb, ‘Speak softly and carry a big stick; and you will go far.’” That was Theodore Roosevelt in January 1900, when he was thinking of the Caribbean Sea, and when he was US Vice President. No one has ever found the evidence for its proverbial source; Roosevelt probably invented its origin in West Africa.
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by John Helmer - Tuesday, May 14th, 2013
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By John Helmer, Moscow

The last time Russian beer drinkers did something unusual was in the unseasonably cool summer of 2011, when sales of the big brand beers dropped sharply. Read all about it. It is happening again, on this occasion during winter, only now the drop in consumption is even more dramatic. This time it looks like a combination of government actions and dwindling numbers of susceptible adolescents are driving the big-money big-brand, foreign brewing companies out of the market to the advantage of Russia’s smaller, regional brewers.

The first-quarter report just out from Inbev (Belgium), the Annheuser-Busch conglomerate which makes Budweiser, Stella Artois, Sibirskaya Korona, and Klinskoye acknowledges that “in Russia, beer volumes fell 17.0% driven mostly by a challenging industry impacted by the new sales restrictions, the carryover of the media ban implemented last July, and price increases following the most recent excise tax adjustment. Our estimated market share remains under pressure, and balancing profitability versus share is a major focus.” Just one Inbev beer brand, Bud, “continues to perform well and grew by over 25% in 1Q13.” This downturn follows a 12% decline in volume for last year, as well as a contraction of Russian market share, explained in the annual Inbev report as “driven by the implementation of tax-related and other selective price increases ahead of competitors, and promotional pressure in key account channels.” With higher priced beer, the loss of sales volume was offset for Inbev by a 19% jump in Russian earnings. Inbev currently claims a market share of almost 16%.
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by John Helmer - Wednesday, May 8th, 2013
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