July 24 (Bloomberg) -- OAO Mechel plunged in New York trading after Russian Prime Minister Vladimir Putin called for antitrust authorities to investigate the company and said the nation should end raw-material import duties.

Putin wants to cancel tariffs on iron ore and coal to curb soaring steel prices as the government embarks on record infrastructure spending. The former president has initiated projects to modernize Soviet-era car, aircraft and shipbuilding industries.

Mechel, the steel and coal producer controlled by billionaire Igor Zyuzin, should be investigated because it sold raw materials in Russia in the first quarter at twice the price of exports, Putin said today at a government meeting in Nizhny Novgorod.

Putin was referring to Mechel's domestic coking-coal sales, Industry Minister Viktor Khristenko said after the meeting, Interfax reported. The company is the biggest supplier of coal for steelmakers in Russia.

Mechel American depositary receipts, each representing one ordinary share, fell $13.77, or 37.6 percent, to $22.84 in New York, in the largest one-day drop ever, according to data compiled by Bloomberg. Evraz Group, Russia's largest steelmaker, dropped 4.2 percent in London, and OAO Novolipetsk Steel dropped 6.9 percent.

Proper Behavior

``If the company behaves properly on the market, it will be fine,'' billionaire Vladimir Lisin, who controls OAO Novolipetsk Steel, was quoted by Interfax news agency. Putin has reacted to ``a situation when someone falls out of mutually accepted norms of behavior in the market,'' Lisin said.

``These companies are charging super-profits at a time of high inflation,'' said James Fenkner, managing director at Red Star Asset Management LP in Moscow. ``And it just shocked people how precarious these guys are.''

Russia's six main steel producers -- OAO Severstal, Evraz, OAO Magnitorgorsk Iron & Steel, Novolipetsk, OAO Metalloinvest and Mechel -- are controlled by eight billionaires, and the state doesn't hold equity in any of them.

Zyuzin, who was invited to attend the meeting, ``has suddenly fallen ill,'' Putin said. He urged Zyuzin to get well soon, ``otherwise, we'll need to send him a doctor and clean up all these problems.''

Putin recommended Mechel's profit margins be examined by the antitrust authorities, and ``if need be,'' the special committee of the General Prosecutor.

Rising Demand

Ilya Zhitomirsky, a spokesman for Mechel, couldn't be immediately reached for comment when called on his mobile phone.

``This has to be one of the great oligarch faux pas,'' Fenkner said in a telephone interview from Moscow. He said Red Star bought Mechel shares today. ``When Putin wants to meet you, you'd better do it.''

Russian demand for rolled steel will reach 70 million metric tons in 2015, almost the equal to the country's total current production, Putin said. Russian companies must meet domestic demand, while maintaining Russia's strong position as an exporter, Putin said.

As part of the strategy to keep Russia supplied with raw materials for steelmaking, Putin also said he wanted the scrap ferrous metals export business to be ``decriminalized.'' Export duties on scrap metals may be raised to encourage more domestic processing, Putin said.

To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net; Alex Nicholson in Moscow at anicholson6@bloomberg.net.

Last Updated: July 24, 2008 17:10 EDT