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Severstal seeks court relief in Cliffs pellet price dispute

Keywords: Tags  Severstal, Cliffs Natural Resources, iron pellets, price dispute, pellet prices, Catherine Ngai

NEW YORK — Severstal North America Inc. has filed a request for interim relief from a federal court in a complaint against Cliffs Natural Resources Inc. over prices in its pellet contract.

The Dearborn, Mich.-based steelmaker claims that Cliffs used a calculation for its 2013 pellet price that was inconsistent with its contract documents, and threatened to cease future shipments to Severstal’s Dearborn facility unless it paid its invoice, according to documents filed Aug. 1 in U.S. District Court in Michigan.

Severstal said Cleveland-based Cliffs wouldn’t reveal how it calculated the price, but asserts "it is clear" Cliffs didn’t follow the terms of the contract.

The steelmaker said it offered to pay a compromise price, but Cliffs declined.

Severstal added that it received a notice from Cliffs on July 26 indicating that if Severstal didn’t pay its invoice by Aug. 5, it would use its right to "withhold future performance, including the cessation of all shipments of pellets (to the Dearborn site)," a move that Severstal said would affect its ability to meet contractual obligations to its automotive original equipment manufacturers and other customers.

Severstal also said that it’s Dearborn facility is required to buy pellets only from Cliffs because there are no other viable alternative sources for the material.

"This freeze will cause a cascading effect down the supply chain, causing further idling of workers and assembly lines at suppliers and subsuppliers throughout the automotive industry," Severstal added.

Severstal has already commenced arbitration proceedings to resolve the pricing dispute, but is seeking interim relief from the court pending the proceedings.

Spokeswomen for Severstal and Cliffs declined to comment.

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