Russian steel maker secures key Asian gateway


	January 23, 2002	atimes.com

Central Asia/Russia

Russian steel maker secures key Asian gateway
By John Helmer

MOSCOW - Russia's Asian gateway of Nakhodka has been taken over by a steel maker, confirming a Russia-wide trend for metal exporters to secure the reliability and the cost of the maritime outlets for trade shipments abroad, especially in the Asia-Pacific region.

Timofey Khryapov, vice president in charge of investment at Evraz Holding, told Asia Times Online that his group, which controls three Russian steel mills and is linked to coal and copper producers, has acquired 60 percent of the shares of the Nakhodka Sea Commercial Port company.

He said the deal, sealed on December 25, involved the sale of shares by the senior management of the port company. A 10 percent shareholding in Nakhodka remains in the hands of Australian entrepreneur Andrew Fox and his Tiger Securities. According to Khyrapov, negotiations to buy Fox's state have been stalled by Fox's asking price, which is double the market valuation for the port company at the moment.

"We have estimated the value of the business, not the value of shares," Khryapov said. He declined to reveal the price Evraz paid for its acquisition. The par value of the Nakhodka port company shares is just 10 rubles (30 US cents); local industry sources claim that Evraz paid substantially more.

The takeover of Nakhodka by the steel maker follows a spate of port acquisitions by other Russian steel makers, oil producers, and Norilsk Nickel, Russia's leading mining company.

Khryapov said that "the reason for the acquisition is that Evraz wants to secure itself against any unexpected growth of costs for stevedoring services of the ports in the Far East, in case new shareholders appeared in Nakhodka or Vladivostok".

Currently, the steel plants controlled by Evraz are the largest exporters of steel products through Russia's fareastern ports, shipping about 300,000 tons per month. Company sources say that Evraz steel exports account for 75 percent of all steel transported through Vladivostok, and 55 percent of the steel exported through Nakhodka. Southeast Asia is the main direction for these exports. Nakhodka is the fifth largest Russian port for shipment of dry cargoes. On the Pacific coast, it ranks second after Vostochny.

Most of this steel goes to China, Taiwan, South Korea, and Thailand. Khryapov said that "the port fits in well with the technological chain that Evraz has built from coal and ore mining to exports of rolled products". He hinted that Evraz might consider buying into Vladivostok also, but there, he noted, the shareholding structure is "more complicated - 20 percent is state-owned, 26 percent owned by Tiger Securities, and the rest held by the managers of the port". He claimed that Evraz is not currently considering purchases of stakes in Russia's southern or western ports, which have been the target of takeover recently by Severstal, another leading Russian steel maker.

One result of the Nakhodka acquisition may be a shift in the flow of steel exports from Vladivostok to Nakhodka, Evraz sources said.

Last year, rising rail tariffs and falling subsidies for the fareastern ports led to a steep decline in shipments of dry-cargo exports through the Pacific coast outlets, and gains by such western ports as St Petersburg, Kaliningrad, and Novorossiysk.

Khryapov said that "it is not necessary to achieve 100 percent use of port capacities, since ports have to have a balanced cargo portfolio. Nakhodka, for example, can handle timber, cotton, cellulose, aluminum and containers. It also has certain capacities for dry bulk cargoes, like coal, but at the moment Evraz doesn't export its coal through far eastern ports."

Now that it has acquired the port, Evraz may decide to route up to 100,000 tons of coal exports through Nakhodka. At present, most of the coal evraz exports goes by rail to eastern Europe.

In 2001, according to Transport Ministry figures, Nakhodka processed 6.5 million tons of cargoes, of which 5.2 million tons (80 percent) were metals. In addition, the port handles large volumes of timber and cellulose. Nakhodka also operates a container link with Vietnam.

Vladivostok last year transported about 5 million tons of dry cargo, more than 60 percent of which was metals.

North along the same coast is Vostochny, which was taken over last year by Severstaltrans, the transport affiliate of Severstal, Russia's second largest steel maker. The two groups have been joined by Magnitogorsk Metal Combine, Russia's largest steel maker, in bidding up the price of port shares in the Pacific region, and also on the Sea of Azov, where the state shareholding in Taganrog port is up for grabs.

The fourth large Russian port in the Asian region is Vanino, which is still 60 percent owned by the state.

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