Reuters reported that pricing issues have led to a dispute between Russian steelmaker Magnitogorsk Iron and Steel Works and Kazakh miner ENRC over the amount of iron ore the steelmaker will take in the fourth quarter this year.

A market source close to the situation told Reuters that "MMK decided to cut the volume of iron ore purchased from ENRC due to a disagreement on pricing.”

MMK signed a contract that obliges it to take 1 million tonnes of iron ore per month from ENRC during 2011 but it has indicated it will take a maximum of 700,000 tonnes per month in the fourth quarter, ENRC said in a statement last week.

ENRC chief commercial officer Mr Jim Cochrane said that "The fact that MMK is taking less iron ore is not directly related to MMK own production cuts, declining to specify whether a pricing issue was at the root of the disagreement.”

A second source familiar with the situation told Reuters that "Since prices of iron ore, in all evidence, tend to slope down both domestically and globally in the fourth quarter compared to the third quarter, MMK would be much better off buying raw materials from alternative sources.”

"In the meantime, MMK, being bound by contractual terms with ENRC, suggested that the contractual terms be modified based on the current market trends. ENRC demonstrated no flexibility which would be quite logical to expect from a long-term partner."

ENRC expects compensation for any negative economic effect as a result of the breach of contract.

(Sourced from Reuters)