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.
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
Severstals Dearborn facility unless it paid its invoice,
according to documents filed Aug. 1 in U.S. District Court in
Cleveland-based Cliffs wouldnt reveal how it calculated
the price, but asserts "it is clear" Cliffs didnt 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 didnt 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 its 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
Severstal has already
commenced arbitration proceedings to resolve the pricing
dispute, but is seeking interim relief from the court pending
Severstal and Cliffs declined to comment.