On May 18, JSC Apatit discontinued apatite concentrate shipments to Acron and Dorogobuzh. After exhausting its raw material inventories on May 29, Acron suspended NPK production at both of its units. If Apatit does not resume phosphate supply, Dorogobuzh will have to stop NPK operations on June 2.
This April, Apatit demanded that Acron and Dorogobuzh buy apatite concentrate at double the 2011 price. This request violates the existing raw material pricing agreements between the companies (which stipulate that any increase in the price of apatite concentrate should be equal to the industrial inflation rate), as well as the provisions of the federal Competition Protection Law.
Under the terms of the existing agreements, any dispute between the parties shall be resolved by negotiation. If negotiation fails, the dispute shall be submitted to an Arbitrazh court. However, Apatit did not file a claim within the established time period and unilaterally breached its agreements with Acron and Dorogobuzh.
The suspension of production will lead to a reduction in tax payments to the regional budget and will be detrimental to the social and economic situation in the Novgorod and Smolensk regions, where the Group’s production facilities are major taxpayers and employers.
Unfortunately, PhosAgro, the managing company of Apatit, has resorted to its customary methods of abuse and economic pressure as a market dominator by terminating raw material shipments to Acron Group’s companies. In the past, Acron Group has had to suspend operations before when FosAgro has invented reasons to cut off apatite concentrate supplies. It is clear that FosAgro’s peculiar interpretation of the raw material pricing formula set by the agreement and its wilful ignorance of the rules of arithmetic, economics and common sense are aimed at more than just boosting profits. FosAgro’s scheme is designed to:
1. Get rid of the main competitor on the international NPK market (primarily in China and Thailand)
2. Get rid of the main competitor in privatisation of a 20% stake in Apatit
3. Hinder timely launch of the Oleniy Ruchey mine by excreting financial pressure on Acron, and eventually prevent the emergence of a rival apatite concentrate producer on the Russian market.
Thus, the monopolist has demonstrated all the signs of unfair competition.
Acron Group has never asked PhosAgro for preferential treatment concerning raw material prices. The Group’s position has been based solely on the principles of lawfulness. At present, by evading the Russian laws, PhosAgro is trying to dictate discriminatory terms and set a price for Acron on terms that differ from those applied to other customers. Acron’s leadership will not submit to the monopolist’s unfair demands and will defend its position using all legal means, and claim all incurred costs and damages.