By John Helmer in Moscow

Russia’s industrial and mining sectors are so thoroughly dominated by the handful of proprietors known as oligarchs, the only time that federal government regulators dare to interfere with their operations by attempting to enforce the law is when the regulators get their cue from a senior government official. And the only time that happens is when the official decides it is time to transfer ownership of an asset, or put the oligarch on notice that his franchise is about to cost him more — much more.

Responding to what it says was a recent individual complaint, Russia’s federal environmental safeguards regulator, Rosprirodnadzor (RPN), announced yesterday that it has started an “off-schedule inspection” of Severstal’s lead Russian mill at Cherepovets.Monday’s official notice by the regulator says the inspection will take eight days, and be focused on “compliance with the environmental protection legislation of the Russian Federation in the field of protection of atmospheric air, treatment of waste of production and consumption, protection of water objects, geological studies, rational usage and protection of mineral resources.” The announcement also claims that the check was started on “a complaint of a Cherepovets citizen… he specified that OAO Severstal dumps chemicals on the soil and breaks the rules of waste storage.”
(more…)

by John Helmer - Tuesday, September 1st, 2009
No Comments »

By John Helmer in Moscow

Despite sinking Russian consumer incomes, the banana is holding firm, enabling the St. Petersburg-based Joint Fruit Company (JFC), to increase its share of sales at the expense of its domestic rivals. With turnover of $500 million in 2007 (the latest figure JFC has released), JFC says there has been no slipping of growth in demand and sales of bananas this year, and its Bonanza! brand is expected to turn the crisis conditions to its advantage.

Russians don’t eat as much fruit as they should, but the first fruit to break through when the Iron Curtain came down was the banana. With average annual consumption of fruit at just 53 kilograms for Russians — half the US consumer level – this year’s loss of real income (in May this was down 20%, compared to the year before) has pushed Russians into cutting their fruit imports, but eating more bananas.

The reduction in fruit imports to Russia has amounted to 6% so far this year, according to a report by maritime analyst Alexei Bezborodov. The cutback is less than the 41% reduction in imports as a whole, but it marks a sharp reversal in the fruit segment of the refrigerated container (reefer) trade, which has been feeding 12% annual growth in fruit consumption. This year, according to a market analyst in St. Petersburg, the Russian fruit market will shrink by 5% overall.
(more…)

by John Helmer - Tuesday, September 1st, 2009
No Comments »

By John Helmer in Moscow

An application by three of Russia’s most powerful steelmakers to have the government impose penalty duties on imports of coated steel, primarily from China, has failed. This is the first sign from the Kremlin that applications by Russian steelmakers that threaten political and trade relations with Beijing, and risk Chinese retaliation, will not be allowed.

On August 26, the Ministry of Industry and Trade in Moscow announced that it will not raise import duties, and that a study of the coated-steel market in Russia had not substantiated the claims of domestic injury, filed in March by Severstal, Novolipetsk Metallurgical Combine (NLMK), and Magnitogorsk Metallurgical Combine (MMK).

The main sources for imported polymer-coated steel in 2008 were China, Taiwan, South Korean, Belgium, Finland, and Kazakhstan. Roughly half of the domestic consumption of the product was supplied by imports during 2008. Last December, according to a briefing the steelmakers gave a Moscow newspaper in March, when the ministry’s import study commenced, the Russian mills shipped 55,000t of polymer-coated steel, while imports were roughly equal in volume.
(more…)

by John Helmer - Friday, August 28th, 2009
No Comments »

Marshal Sergei Fyodorovich Akhromeyev

 

“Everything I have worked for throughout my life is being destroyed.”

 

— August 24, 1991

by John Helmer - Monday, August 24th, 2009
No Comments »

By John Helmer in Moscow

The Far Eastern Shipping Company (Fesco), owned by Sergei Generalov, is likely to run a loss of at least $72 million this year, before foreign exchange losses and writedowns are counted, according to a new report on the company issued today by Moscow investment bank, Renaissance Capital. With total debt of $915 million — $215 million to be repaid before December 31 — RenCap analyst Alexander Kazbegi forecasts that Fesco’s liner business will see revenues fall by 36% on last year; the port division’s revenues will drop by 70%; and the rail division’s revenues will fall by 36%.

In reaction, Kazbegi reports Fesco as telling him the company intends to sell as many vessels as it can “while there is still a market for them despite prices being currently some 50% lower than in 1H08”. It has cancelled a plan for $100 million in newbuild orders, and is delaying delivery of four newbuild contracts from 2010 to 2011. According to Kazbegi, Fesco intends to delay, and in time possibly cancel commitments to build a new container terminal at Ust-Luga, and buy the 50% stake it doesn’t own in the Vladivostok Sea Port and Vladivostok Container Terminal.

The Rencap report also reveals that the dwindling value of Fesco’s fleet may breach loan covenants and trigger fresh problems with banks.

by John Helmer - Sunday, August 23rd, 2009
No Comments »

By John Helmer in Moscow

Novorossiysk Commercial Seaport Company (NCSP is the London ticker), the only internationally listed Russian port, crashed Friday [August 7] by almost 6% in Moscow stock market trading, despite a stable report and ratings confirmation from Standard & Poors. S&P’s August 6 report said that continuing growth of Russia’s seaborne trade on the export side, especially of oil and grain, supports a stable outlook for the Black Sea port, with rising cargo volumes, improving revenues, higher cashflows, and a modest decline in debt. Taken cumulatively, S&P said it is reconfirming the port company’s BB+ issuer rating.

However, S&P warned that NCSP “lack[s] sophisticated corporate governance”, adding that the “concentrated ownership structure poses additional risks to creditors. Existing corporate governance provides some protection, but doesn’t fully balance inherent conflicts of interest.” S&P fails to say what the port company’s ownership structure is.

The company’s financial report for 2008, released this past April, also does not clarify the shareholding split between Alexander Ponomarenko (picture) and Alexander Skorobogatko, who are identified in auditor’s notes, along with their families, as “the ultimate controlling parties”. The company’s annual report indicates that they hold 50.01% through Kadina, an offshore registered company. This also suggests that since the initial public share offering in London in 2007, NCSP’s free float amounts to about 18.3%. Another 20% stake is owned by the Russian state, but this appears to be under control of the state-owned Russian Railways Company (RZD). This leaves about 12% of the shares unaccounted for, but described in the annual report as unidentified minority shareholders.
(more…)

by John Helmer - Sunday, August 23rd, 2009
No Comments »

By John Helmer in Moscow

Far Eastern Shipping Company (Fesco), Russia’s fleet leader for dry cargo and containers, is headed for an even bigger year-end loss than industry analysts or the company have acknowledged before.

A new report, issued on August 7 by Moscow investment bank Renaissance Capital, predicts that group revenues will fall 41% to $1.2 billion; earnings down by 61% to $128 million; and the net income line will turn to a loss of $72 million. This is double the loss estimated by Troika Dialog bank in June.

Owned and managed by Sergei Generalov, Fesco’s struggle with fleet writedowns and net debt of $934 million has postponed a new loan approval by the European Bank for Reconstruction and Development; and triggered, according to Rencap analyst Kirill Kazanli, “a breach of some [loan] covenants…While we believe FESCO is likely to successfully renegotiate those, it has essentially cut capex [capital expenditure] to zero, not making any acquisitions, selling some of its assets (mostly ships) and trying to hoard cash.”
(more…)

by John Helmer - Sunday, August 23rd, 2009
No Comments »

By John Helmer in Moscow

The last time Russia was obliged to teach strategy to the ruling powers of the Baltic Sea — in the 18th century, they were the Swedes – at the Battle of Grengam (pictured), the Russians claim they won. But so do the Swedes. The outcome, however, was that the Swedish navy could no longer hope to bottle up the Russian fleet in the Gulf of Finland.

For the next three hundred years, there have been two constants in Russia’s Baltic Sea strategy that don’t change with the vicissitudes of who’s in or out of power in the Kremlin, or along the Baltic littoral.

One is that for its economic prosperity and security, Russia must find as many alternatives as possible to the high seas of the Baltic for getting its goods to and from market. As volumes of energy exports rise, that means finding ways around, under, or over the NATO-controlled chokepoint of the Danish Straits.
(more…)

by John Helmer - Sunday, August 23rd, 2009
No Comments »

by John Helmer - Saturday, August 22nd, 2009
No Comments »

by John Helmer - Sunday, August 2nd, 2009
No Comments »