Three metals and mining companies have delayed their initial public offerings (IPOs) since the beginning of February, saying that market conditions were unfavorable for offerings.

Analysts believe the current turbulence on the stock market is a short-term phenomenon and the IPO delays have been caused primarily by the companies’ desire to sell shares at a higher price than they can count on at the moment.

In March, two companies from the metals and mining industry, namely steelmaker Severstal’s gold mining division Nord Gold N.V. and steel pipe producer Chelyabinsk Tube Rolling Plant (ChelPipe), postponed their IPOs, following coke and cast iron producer Koks Group that delayed its IPO earlier in February. All three companies cited unfavorable market conditions as the reason behind their decisions to postpone IPOs.

Some analysts agreed that market conditions were not perfect for making IPOs at the moment. Metals and mining companies that are already trading are generally showing negative dynamics on stock markets. “This applies to all metals and mining companies, as investors have recently been selling companies from this sector, which were overbought in January,” Gazprombank analyst Sergei Kanin said.

In mid-March, the situation for commodities companies, including for those in metals and mining, worsened because the Chinese central bank’s decision to raise refinancing rates had a negative effect on those companies, investment bank UralSib analyst Dmitry Smolin said.

Investment company Otkritie analyst Denis Gabrielik, however, disagreed, saying that market conditions are not that bad; at least not all companies are vulnerable to some negative short-term trends. “The current market conditions are good for producers of iron, and these conditions are likely to remain favorable. The price for coking coal is likely to remain at a high level, and prices for steel are expected to grow,” he said.

“Koks Group, a company from this particular sector, delayed its IPO because it doubted that investors would buy its shares at the overstated price it set for the offering,” Gabrielik said.

The company set the price range of the IPO at USD 6.25 – USD 8.00 per share, which translates the value of the entire company to between USD 2.1 billion and USD 2.6 billion, the company said in late January, adding that it planned to sell up to 20 percent of its shares in the IPO.

An unwillingness to offer shares at low prices can be seen as the reason behind other companies’ IPO delays. A source from Severstal, for instance, said after the company announced the delay of Nord Gold’s IPO that Severstal did not intend to offer shares of its gold mining division at a price lower that it had initially set.

Nord Gold set the price range of its IPO at 3.0-3.9 British pounds per share, valuing the company at between 2.5 billion and 3.2 billion British pounds. The company expected investors to buy shares worth a total of between about 620 million and 810 million pounds from an additional issue and from existing shareholders.

ChelPipe planned to make an offering at a price of USD 3.5 – USD 4.6 per share, valuing the whole company at between about USD 2.0 billion and USD 2.7 billion. The company said the total value of shares to be offered, including shares of existing shareholders and from an additional issue, was expected to amount to between USD 473 million and USD 621 million. “If the company had finally decided to make an IPO, it would have to reduce the price range by 10 or 15 percent,” Smolin from UralSib said.

The delays have thus been caused by the companies’ desire to raise more money through IPOs than they could raise at the moment, Smolin noted, adding that the companies just happened to get to the final stage of IPO preparations in such a turbulent period, which is unlikely to last long because the metals and mining sector has generally good prospects while commodity prices remain high.

The companies are expected to make IPOs already in July-December, if market conditions improve, Kanin from Gazprombank said.

Smolin from UralSib provided a narrower timeline for when the three companies might try to make IPOs – September-November, as February – April and September – November are traditionally popular periods for making share offerings.

Meanwhile, there are several other metals and mining companies that reportedly plan to make IPOs in 2011, and these companies should take into account the fact that investors might not be ready to buy the shares offered by of all of them.

“While Koks Group, ChelPipe, and Nord Gold are likely to make all preparations for IPOs in late 2011 easily, as they have already gone through a long journey, other companies are likely to face some difficulties,” Kanin from Gazprombank said, adding that the key question is whether the market can “swallow” all the offered shares. “Investors’ money might not be enough to buy the shares of all these companies at their IPOs,” he added.

The problem is there are few Russian companies that have made successful IPOs, Smolin from UralSib said, adding that share prices of 80 percent or 90 percent of them fall after IPOs.

One of these companies looking forward to making an IPO is metals holding Metalloinvest, whose major shareholder, tycoon Alisher Usmanov, said in December 2010 that the company might make an IPO in 2011. Usmanov said the company was ready to make an IPO but everything depended on market conditions.

Another company from the sector, uncut diamond monopoly Alrosa, is expected to be technically ready for an IPO by the end of 2011, Alrosa’s president Fyodor Andreyev said in early February without providing the exact timeline for an offering.

Also, gold producer Polyus Gold, which is already trading, is seeking to make an additional share offering in order to obtain a premium listing on the London Stock Exchange (LSE). Polyus Gold’s share offering looks the most promising, Smolin from UralSib said. “The issuer is well-known by the market, which is an advantage; also, Polyus Gold is very determined to make the offering in London, as this is expected to improve the company’s equity multipliers by expanding the range of investors,” he added.