Russian steel association calls on government to revise 15% export duty on metals

Russian steelmakers association Russkaya Stal called on the government to amend the introduction of 15% duty on exports of steel and steelmaking input products from Aug. 1.

The duties should be revisited to mitigate their adverse impact on the nation’s steel industry, the association said in its statement released July 2.

Russian steel producers already have to navigate 50 external trade barriers to their exports and the duties the Russian government is imposing will make things much worse, not only for them but for the state budget too, the association said.

The rise in steel prices in the global market, along with Russian steel mills’ efficiency, boosted their profits.

Accordingly, tax payments of members of Russkaya Stal in H1 2021, estimated at Rubles 200 billion ($2.7 billion), appear twice as much as the fiscal contribution to the state budget in H1 2020.

A potential year-on-year increase in full year 2021 tax contributions from the domestic steel industry was forecast at Rubles 250 billion and the government could have used this additional revenue to beef up the budgets of state-financed metal-intensive projects. However, the duties that will be effect in August-December 2021 will not let this expectations of extra earnings and payments materialize, according to Russkaya Stal.

Under the new tax, the association does not rule out 1 million-2.5 million mt reduction in mining and steel companies’ exports, which will equate to Rubles 150 billion-180 billion losses for the producers and to Rubles 30 billion-51 billion shortfalls in tax payments to the state budget.

The duties will also cover exports of commodities, the consumption of which is minimal in Russia — steel billets, pig iron and direct reduced iron.

The manufacturers for whom these products make up the bulk of output will be facing the risk of significant financial underperformance and production decline, said Russkaya Stal.

For the whole industry, the decline in output may total 1 million-2.5 million mt this year as a result of the duties, the association estimated.

Maintaining export volumes is in Russia’s best interests given that its own steel demand cannot absorb the volumes that the new fee will prevent from leaving the country.

Domestic annual consumption of rolled steel did not exceed 46 million mt even in the best years since 2000, while the country’s average annual production stands at 65 million mt with the steelmaking capacity being even larger at 86 million mt/year, according to Russkaya Stal.

— Ekaterina Bouckley