Putin Vows To Help Russian Steel Industry

MAGNITOGORSK, Russia (AP) -- Prime Minister Vladimir Putin told Russian steel executives gathered Friday at a giant Stalin-era plant that he would help their struggling industry cope with the economic downturn.

"We will try our best to stimulate demand for metals," he told the executives. "We will place orders with construction companies, auto makers and other traditional (steel) consumers."

Putin said the government also will take steps to fight protectionism that is hurting Russian exports.

He added, however, that the industry will not be saved "at the expense of the budget" or "at the expense of auto makers or construction companies," among their prime customers.

The steel makers were hoping to win the powerful prime minister's support for lower taxes, especially after Putin offered tax breaks to the coal industry on Thursday, giving shares in coal companies a strong boost.

Putin said the government would consider their requests for a range of measures, including state guarantees for loans, a quicker turnaround for tax refunds, lower customs duties on equipment needed for modernization and greater state support on foreign markets. But he gave no promises and urged the steel makers to take advantage of the crisis to modernize production.

The government may be unwilling to make major commitments to the steel industry because steel prices have recently shown signs of recovery.

Alexei Mordashov, chief executive and majority owner of No. 1 steel producer Severstal, urged the government to do more to help steel producers compete on world markets.

As domestic demand for steel has collapsed, Russian companies have compensated by increasing exports, helped by a weak ruble that has made Russian steel more competitive. China, however, has complained of dumping and opened an investigation in June into whether Russia was selling one type of steel at below market value.

Before chairing the meeting, Putin toured the sprawling Magnitogorsk Iron & Steel Works, Russia's third largest steel producer, which began production in 1932 as a showpiece of Communist industrial achievement under Soviet ruler Josef Stalin.

Putin visited the construction site of a $1 billion cold-rolling workshop scheduled to go into operation in 2011 and a nearly 2 kilometer-long (1.2 mile-long) hot-rolling workshop, where slabs of burning-hot metal roll out on the production floor, heating the workshop to sweltering temperatures.

At a similar meeting with steel executives a year ago, Putin lashed out at the head of major coking coal producer Mechel for what he described as Mechel's scandalously high prices. His remarks caused the company's shares to plummet, cutting their value in half.

Mechel's shares, which still trade far below last year's levels, rose nearly 13 percent in the U.S. on Thursday following Putin's promises of tax breaks.

Russian steel demand will decline by 22 percent this year, according to the latest report by the World Steel Organization. Steel output in Russia -- the world's fourth largest steel producer -- dropped 33 percent in June year-on-year.