The main suppliers of
scrap which provide approximately 200,000 metric tons of
scrap, or 70 percent of monthly requirements, to the Russian steelmaker
Severstal are planning to temporarily stop their deliveries from January 20, 2007.
According to the letter which has been addressed by the
scrap suppliers to
Severstal's Commercial Director Mr. Igor Nechaev, starting from January 1, 2007, more than 90 percent of all
scrap suppliers have switched to sales of
scrap without VAT. Meanwhile,
Severstal is offering to continue either with VAT included, or else at uncompetitive prices but with a zero VAT level. This disagreement between
Severstal and the
scrap suppliers is the main reason behind the decision of the latter to temporarily halt
scrap supplies to
Severstal starting from January 20, 2007, unless a compromise is reached before this time.
As previously reported by SteelOrbis, the
Russia Federation implemented the law canceling VAT collection on
scrap operations as of January 1, 2006. However, the law reserves the right of interested parties to continue working with VAT. This provision has created some confusion in the market since the majority of
scrap collectors have switched to sales without VAT, while many steel mills seek to continue working with VAT included.