Ukraine Challenges Mittal Over Steel Obligations

KIEV, Ukraine -- Ukraine's State Property Fund said on Friday it would consider legal action against Mittal Steel as it says the world's top steel maker has not met obligations after buying the country's largest mill.


Mittal Steel denied the accusations.

Valentyna Semenyuk, head of the State Property Fund, said the privatisation agency would consider filing a suit to the international arbitration court if it did not receive a response from Mittal by a June 6 deadline.

She said the fund, having completed a review on May 5, was not satisfied that Mittal Steel had met its contractual and investment obligations.

Mittal Steel, whose $4.8 billion purchase of the Kryvorizhstal plant at a privatisation auction in October made it the largest single foreign investor in Ukraine, said it was meeting all contractual obligations.

The company's Ukrainian unit said in a statement it disagreed with the state property fund on the interpretation of some of these obligations.

"The company was genuinely surprised to see reports ... where the company is accused of failing to fulfil agreed obligations," it said.

Frank Pannier, chief of human resources and public affairs at Mittal Steel Kryviy Rih, said: "To talk about the annulment of the agreement due to disagreements in the interpretation of one article in the obligations, when all others are met -- and there are nearly 60 -- is illogical and wrong".

Mittal officials have sent a letter to the property fund, explaining the company's position and asking for a meeting with the head of the fund, the company said in a statement.

Semenyuk said a meeting was possible next week.

She said the fund had demanded Mittal Steel raise wages to a legal minimum and pay annual bonuses to employees based on 2005 results. Kryvorizhstal employs about 57,000 people.

Mittal Steel plans to invest about $1.2 billion to modernise the steel plant and mine more iron ore in the surrounding area.

Kryvorizhstal's sale to Mittal last year was hailed as one of the main successes of President Viktor Yushchenko during his first year in office after Ukraine's Orange Revolution.

The auction was meant to attract back western investors made wary by turmoil during his first months in office, and was ordered after a court overturned the initial sale of the mill to businessmen with links to former president, Leonid Kuchma.

Mittal Steel Kryviy Rih's sales would amount to about 4 billion hryvnias ($792 million) in the first four months of 2006, the company said.

Crude steel output was 2 million tonnes in the period, down 1.7 percent year-on-year, while rolled steel output rose 1.8 percent to 2.1 million tonnes in the same four months.

Source: Reuters

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