Russia’s Magnitogorsk Iron and Steel Works (MMK) tells Kallanish that it has signed a price calculation agreement with an established customer, tubemaker TMK.

The company will apply a formula when calculating the pricing of wide hot-rolled plate shipped to TMK. The agreement was signed by MMK ceo Pavel Shilyaev and TMK ceo Alexander Shiryaev.

The price formula for rolled steel produced by MMK is calculated using direct costs method, with key variables of raw materials and production costs. The formula is also subject to price indexation in connection with the inflation rate and FX rate fluctuations. The price for rolled steel based on the agreed formula will be set on a quarterly basis. The agreement is valid for the period between 2016 and 2018.

“This agreement will enable us to develop our cooperation step by step in the coming years. It demonstrates our mutual interest in sustainable relations. We have strategic connections with ТМК, and therefore we aim to strengthen our partnership also via such agreements. Transparent and clear pricing is an important part of this development,” says MMK’s Shilyaev.

“MMK has long been the largest supplier of hot-rolled steel plate for the production of large diameter pipes at Volzhsky Pipe Plant, part of TMK. This agreement will enable both parties to significantly reduce risks during periods of volatility on commodities and FX markets, while making pricing mechanisms more transparent and enabling more efficient planning of operations,” adds TMK ceo Shiryaev.