Russian shares down following PM Putin remarks on Mechel company

A harsh statement made by Russian PM Vladimir Putin calling for an investigation at the Mechel company and on his key shareholder Igor Zyuzin has led to a sharp fall of over 30% of Russian raw material stocks in New York and led to fears that Russia may face a new Yukos case. Putin criticized Mechel for setting lower pricing for exports than for deliveries on the domestic market.

He also criticized Mechel shareholder Igor Zyuzin, a well-known Russian billionaire, for failing to show up at a meeting with industry representatives on Thursday. Putin also urged authorities to investigate the company for its pricing practices.

Mechel majority shareholder Igor Zyuzin has been hospitalized at the Sechenov Academy for a series of analyses since Wednesday, a medical source there told Ria Novosti agency on Friday.

Russian markets plunged considerably on Friday as Putin’s statements produced panic among investors.

Putin made the statements at a conference with Russian steel making industry bosses and members of the Government. The talks were attended by businessmen such as Oleg Deripaska, Aliser Usmanov, Vladimir Lisin, Aleksandr Abramov and Sergey Kogogin.

The Russian government has been looking for months for means to stop rising steel prices which say a 50% increase since the start of 2008.

Mechel operates mining and steel production units in Russia, Romania and Lithuania. In Romania, Mechel International Holdings AG holds the majority stake in Mechel Targoviste and Mechel Campia Turzii plants, as well in the Ductil Steel Buzau factory.