IMPLEMENTATION LEVEL

IFI

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

firm-specific

JUMBO

No

TARIFF PEAK

No
← back to the state act
Inception date: 29 Dec 2016 | Removal date: open ended
Still in force

State loan

The loan amount that EDB provides to IMH is US $90 million. The maturity of the loan is eight years. Technically, the borrower in the transaction is Kombinat KMAruda (a related company of IMH) and the guarantors are Koks and Tulachermet (related companies of IMH). The EDB-financed project involves a construction of a new mine. It has the purpose of increasing KMAruda's yearly output from the current 4.6 million tonnes to 7 million tonnes of iron ore. KMAruda’s total iron ore reserves are at the amount of 356 million tonnes and are sufficient to meet IMH’s demand for this stock for more than fifty years.

On the basis of the EDB's official press report, a conclusion can be drawn that IMH and, more broadly, the local ore extraction industry gain a competitive advantage when compared with foreign competitors because the purpose of the financing is: 

  1. "to boost the production capacity of iron ore" of IMH and
  2. "to finance a project to enhance iron ore outputs with reserves originating from the lower levels of KMAruda’s Korobki deposit".

The official statement of Mr Konstantin Limitovsky, a Deputy Chairman of the Management Board at EDB, confirms the beneficial conditions that the local company has obtained and the consequences of their application: 

“As early as in the beginning of 2016, EDB’s analysts forecasted the recovery of the market of [...] metallurgical raw materials, including metallurgical coal and iron ores, which became possible due to shrinking production in China. Since the realisation of the project targets the securing of the holding [GTA note: IMH] with its own iron ore supplies and the reduction of the purchase costs for raw materials in the market, the enhancement of the Korobki deposit’s output will have a positive effect on IMH’s financial performance.” 

Mr Sergey Cherkaev, Vice President and CFO at IMH, has also confirmed that IMH has gained a competitive advantage based on the received financing:

“The agreement with EDB was concluded as part of IMH’s financial strategy aimed at decreasing the overall cost of the holding’s loans and an extension of its loan duration period. [...]” 

Background:

Russia and Kazakhstan founded the Eurasian Development Bank (http://eabr.org/) in January 2006. The mission of this international organisation is to facilitate the economic development and the expansion of mutual trade and other economic ties in its member states. Currently, the member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan. EDB's charter capital totals US $ 7 billion. 

The Industrial Metallurgical Holding (http://www.metholding.com/) is a Russian company that produces commercial iron, produces and processes metallurgical coal and iron ore, and is engaged in foundry and powder metallurgy. It is the world’s largest exporter of commercial iron and Russia’s top supplier of coke. 

Disclaimer:

The GTA includes state guarantees and other financial incentives that are likely to affect the restructuring and performance of firms facing international competition, whether from imports, in export markets, and from foreign subsidiaries.

AFFECTED COUNTRIES

MAP
TABLE
EXPORT

AFFECTED SECTORS AND PRODUCTS

110 Coal & peat
2701 Coal; briquettes, ovoids and similar solid fuels manufactured from coal.
270111 Anthracite
270112 Bituminous coal
270119 Other coal
141 Iron ores & concentrates, other than roasted iron pyrites
2601 Iron ores and concentrates, including roasted iron pyrites.
260111 Nonagglomerated
260112 Agglomerated

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