Russia to levy export duty on steel, scrap

Russian federal anti-monopoly service FAS suggests all exports of steel products should be liable for duties, not just ferrous scrap, as implemented by the economic development ministry earlier in December.

FAS is responding to the request by deputy prime minister for construction and development Marat Husnullin in connection with rising domestic steel product prices. This follows a petition from construction industry representatives. 

The ministry agreed to raise the existing 5% ferrous scrap export duty to 15% and the minimal fiscal value to €45/tonne ($55) from €15/t, for six months. This followed a request from the country’s Pipe Industry Development Foundation (FRTP), representing major Russian steelmakers. The hike is aimed at securing sufficient and appropriately priced feedstock supply for Russian mills (see Kallanish 21 December).

FAS argues Russia’s domestic steel industry is deeply enshrined in the global steel market, and is influenced by its trends directly. It describes Russian domestic steel prices gaining up to 30% in November and early December, with rebar prices rising 16% from end-October to early December, and flat products by 20%.

Despite this, local values do not exceed export prices, which grew even stronger in the same period, while domestic scrap prices have also gained 35% from the start of 2020, according to FRTP.

As a result, and a temporary differentiated regressive measure for the six-month duration of the scrap export duty, FAS proposes export duties for steel billet at 13% but not less than $73/t and 12% but not less than $78/t for rebar.

This is necessary in order to prevent possible reallocation of income from scrap procurement companies to steelmakers. This would be the case if the scrap export duty hike leads to a lowering of domestic scrap prices while steel export prices continue to rise or stay at current levels, its explains.

Market participants tell Kallanish the decision on scrap and rebar duty implementation has been made, and will apply from February. “Billet matters will be discussed in January,” a major producer’s representative says. All steelmakers and traders pointed out that the scrap and rebar export duty may indeed constrain exports and bring domestic prices down, leading to higher billet export availability. This could possibly result in countervailing measures from billet importing regions, as such action may be interpreted as a subsidy.

“Ultimately this long-fought-for scrap export restriction designed to support Russian steelmakers may act against them,” an industry insider says.