Russian steelmakers TMK and Magnitogorsk Iron & Steel Works (MMK) have signed an agreement to apply a price formula for hot-rolled heavy plate supplied to TMK.

The document was signed by Alexander Shiryaev, CEO of TMK, and Pavel Shilyaev, CEO of MMK.

The price formula is based on the direct cost method. Its main variables include the cost of raw materials and the production cost of steel plate. Based on this formula, the price is also adjusted for inflation and currency exchange rates. The price of steel plate will be revised quarterly and the terms of the agreement are valid for the period 2016-2018.

According to TMK’s CEO Alexander Shiryaev, MMK is a traditional and major supplier of hot-rolled steel plate for the production of large diameter pipe at TMK’s Volzhsky Pipe Plant. “The price formula will enable both parties to significantly reduce risks in the periods of volatile commodity and currency markets, making pricing mechanism transparent and improving planning efficiency", he said.

MMK’s Pavel Shilyaev said, "The agreement will enable us to gradually develop our partnership in the coming years. It demonstrates our mutual interest in keeping our relationship stable. We believe our collaboration with TMK is strategic and, therefore, we try to strengthen our partnership. Open and clear pricing is one of the major components of our work.”