MOSCOW. Feb 14 (Interfax) - Voskresensk Mineral Fertilizers, a division of the UralChem group, shut down production for three months on February 7 due to a lack of feedstock, several sources at the company told Interfax. UralChem's press service confirmed this information.
"VMF has been temporarily put into an idle regime from February 7 to May 7, 2014 due to a lack of core feedstock. In accordance with labor legislation, workers will be paid two-thirds of the average wage during this period," the company said.
"If the situation with feedstock supplies does not improve in the period of the temporary shutdown, the question of completely shutting down VMF will be raised," a spokesman for UralChem said.
The company said that the Federal Anti-Monopoly Service (FAS), the Russian government, Industry and Trade Ministry and Moscow Region government have been notified of the situation. The timetable for considering the issue is from one to three months," the company said.
It was reported earlier that UralChem and PhosAgro (MOEX: PHOR) could not reach an agreement on supplies of feedstock - apatite concentrate - for VMF. VMF's contract for apatite concentrate supplies expired at the end of 2013. The companies did not sign a new contract, as they could not agree on pricing terms. VMF proposed to renew the contract on the previous terms, where the price of the apatite was calculated based on past prices adjusted for the industrial inflation index. VMF also proposed to buy 500,000 tonnes of apatite concentrate in 2014 instead of the 850,000 tonnes supplied in 2013.
PhosAgro was prepared to sign a contract based on one of the formulas recommended by the FAS, but UralChem said that under those pricing terms VMF would operate at a loss.
VMF tried to secure a contract for apatite supplies on its own terms through the courts in 2013. The court of first instance ruled in favor of Apatit. VMF appealed the ruling in appellate court, but withdrew the lawsuit on December 10, 2013.
PhosAgro said that, after the withdrawal of VMF's lawsuit, which stated that the company did not want to enter into a contract with the feedstock supplier, Apatit filled orders from other consumers and sold them the concentrate previously set aside pending the dispute with VMF. For 2014, VMF was offered the amount remaining that was not under contract - 60,000 tonnes.
UralChem said that in the course of negotiations VMF had agreed to buy feedstock at Apatit's asking price (about 5,200 rubles/t), but with the option to review it based on the results of the court proceedings.
VMF has not been buying apatite concentrate from PhosAgro since the start of this year and has been operating on feedstock reserves. In January 2014, VMF filed a new lawsuit against Apatit with the Moscow Arbitration Court and a preliminary hearing is scheduled for March 6.
Last week, the Russian government ordered the Industry and Trade Ministry and FAS to work out measures to resolve the problem with supplies of apatite concentrate to VMF.
VMF has capacity to produce 750,000 tonnes of MAP and DAP, 200,000 tonnes of ammonia, 300,000 tonnes of phosphoric acid and 1.1 million tonnes of sulphuric acid annually.
VMF accounts for about 10% of Russia's production of phosphate fertilizers, and is the principal employer in the Moscow Region city of Voskresensk. VMF produced 675,000 tonnes of mineral fertilizer in 2012.
(Our editorial staff can be reached at firstname.lastname@example.org)
Russia never threatened to stop gas supply to Ukraine but insists on fulfilling contract - Kremlin spokesman
Kremlin spokesman refuses to say in what situation Russia may use force in southeastern Ukraine
Russia has been, will be reliable supplier of energy resources - Kremlin spokesman (Part 2)
U.S. statements on new sanctions against Russia does not promote atmosphere of dialog - Peskov
Russia should treat each request on inclusion of other peoples in its composition "extremely carefully" - Kremlin spokesman
Russia has been, will be reliable supplier of energy resources - Kremlin spokesman
Yanukovych has to stay on Russian territory under Russia's protection - Kremlin spokesman