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Automatically translated version. May contain inaccuracies compared to the original.
How Rinat Akhmetov Is Absorbing Ukraine’s Metallurgy
The richest Ukrainian now has almost no competitors in the metallurgical market, which provides Ukraine’s main inflow of foreign-currency earnings. What share of the market has the oligarch subordinated to himself?
The mining and metallurgical complex (MMC) is one of Ukraine’s main sources of foreign currency, and high international steel prices are a guarantor of hryvnia exchange-rate stability.
This industry, which in 2017 exported products worth $10,7 billion, is effectively controlled by one person – Rinat Akhmetov.
The billionaire continues to expand his control over the sector’s enterprises. Thus, in August 2018, Metinvest acquired for $190 million a stake in the largest producer of coking coal in Ukraine, which includes the Pokrovske mine and the Sviato-Varvaryna beneficiation plant. The enterprises belonged to Russian businessman Viktor Nusenkis.
However, Akhmetov’s influence on the MMC is increasing not only through official acquisitions of assets.
For example, the chief accountant of the Dnipro Metallurgical Plant (DMZ), which Alexander Yaroslavsky recently bought from Russian Evraz businessman Roman Abramovich, was appointed a top manager from Akhmetov’s circle.
Artem Nazym, before heading accounting at DMZ, held the same position at the Dnipro Metallurgical Combine (DMK).
Officially DMK belongs to the ISD corporation with Russian shareholders, but the enterprise is controlled by the largest mining and metallurgical group Metinvest of Rinat Akhmetov and Vadym Novynskyi.
Control over the enterprise was obtained by Metinvest in repayment of 10 billion hryvnias of debt for iron ore raw materials.
Before working at DMK, Nazym held managerial positions within Metinvest structures. Before announcing the takeover of DMK management from the ISD group, Metinvest’s management had also initially entered this enterprise.
What is Metinvest?
Metinvest is a vertically integrated holding: from ore extraction to steelmaking and rolled-product manufacturing.
The company’s revenue in 2017 was 250 billion hryvnias, and profit was 17,3 billion hryvnias.
It is Ukraine’s largest holding. Its revenue is 23 billion hryvnias higher than the consolidated earnings of NJSC Naftogaz of Ukraine.
The main shareholder of Metinvest is Rinat Akhmetov (71,24%), and a minority stake (23,76%) belongs to Opposition Bloc deputy Vadym Novynskyi.
If we assume that the Dnipro Metallurgical Plant was acquired from Evraz in Akhmetov’s interests, then the richest Ukrainian would have only one competitor left in Ukrainian metallurgy – ArcelorMittal Kryvyi Rih. The enterprise belongs to the international group ArcelorMittal.
This is how the distribution among enterprises looked by volumes of steel produced in 2017.
And this is how the structure of steel production would look after DMZ entered Rinat Akhmetov’s orbit.
A similar picture applies to pig iron production in Ukraine and rolled-product manufacturing.
Metinvest’s main metallurgical assets are the Mariupol plants Azovstal and Ilyich Iron & Steel Works.
The holding also includes four European rolling mills. They process semi-finished products from Ukraine.
Akhmetov also owns the metallurgical giant Zaporizhstal. The plant is not part of Metinvest.
Akhmetov’s enterprises also dominate iron-ore mining. Last year they mined 72% of iron ore. Metinvest’s ore division includes the Inhulets, Northern and Central mining and beneficiation complexes (MBCs). In 2017 they produced 26 million tons of concentrate.
Metinvest’s mining-and-beneficiation complexes are the main sources of dividends for shareholders. For example, in 2018 the Inhulets, Northern and Central MBCs paid nearly 5 billion hryvnias in dividends for 2017 year.
In addition, Akhmetov controls the country’s largest ore-producing enterprise – the Southern MBC, which in 2017 produced 12,3 million tons of ore. The enterprise’s revenue last year was 20 billion hryvnias, and net profit was 9 billion hryvnias.
The billionaire also owns half of the Kryvyi Rih Iron Ore Combine (KZRK), which mines ore by the closed method. Last year that enterprise mined 5 million tons of ore. The other half of the enterprise belongs to Ihor Kolomoyskyi and Hennadiy Boholiubov, co-owners of the Privat financial-industrial group.
2017 KZRK finished the year with revenue of 5,5 million hryvnias and net profit of 1,8 billion hryvnias.
Although Southern MBC and KZRK are not part of Metinvest, the State Register of Legal Entities lists Rinat Akhmetov as their ultimate beneficiary.
Under Ukrainian law, an enterprise obtains a monopoly or dominant position when its market share exceeds 35% and the economic operator has not proven that it faces significant competition. At the same time, Rinat Akhmetov has already concentrated more than 35% of metallurgical capacities.
Formally he does not violate antimonopoly law, since not all enterprises under his control are part of Metinvest.
In 2011, then-head of the Antimonopoly Committee Rafael Kuzmin stated the absence of a Metinvest monopoly. He explained this by saying that the holding’s product prices are set on world markets. That is, the holding itself cannot influence them, and therefore does not have market power.
However, the problem is not so much the presence or absence of market power as it is Akhmetov’s administrative resources inside the country. Thanks to this administrative resource, the oligarch has gradually absorbed almost all Ukrainian metallurgical enterprises into his empire.
Yurii Vynnychuk
Document: PDF proof of the original version of the news item "Як Рінат Ахметов поглинає металургію України". It records the publication content at the moment of the first scan, the preservation date and the source: ANTIKOR.
