Import duty annulment relieves MMK
In an effort to ensure that Russian steelmakers are not choked by rising raw material costs, Vladimir Putins government recently decided to annul the 5% import duty for
iron ore.
The decision should especially thrill Magnitogorsk Metallurgical Combine (
MMK), since it is the only major Russian steelmaker without guaranteed raw material resources.
Of
Russias three main
iron ore processing plants, one is owned by
Russias top steelmaker, Evrazholding, while the other two are owned by Alisher Usmanovs Gazmetall group. The latter accounts for nearly 40% of
Russias 100 million ton annual
iron ore production.
However, analysts do not think that the cancellation of the import tax will have a marked effect on the domestic situation. 5% is a drop in the bucket when the 71.5% global price increase for
iron ore is taken into account.
Plus, domestic prices for
iron ore in
Russia have been climbing steadily due to increased Chinese demand for
iron ore from
Russia and other
CIS countries.
Therefore, for Moscows recent move to really level the playing field for
MMK, a duty would need to be applied to
iron ore exports.