International credit rating agency Fitch Ratings has stated that high steel and base metal prices will cushion the impact of Russia’s new temporary export duty, though, if the measures are extended, the impact could be greater once prices moderate. Fitch said it expects the new duty to have a limited impact on global metal prices, although steel and aluminium markets could be affected in the short term. Fitch estimates the maximum impact on Fitch-rated companies’ EBITDA to be less than 15 percent in 2021.
Looking at the companies, Fitch stated that both NLMK and EVRAZ export about 50 percent of their domestically produced steel and their EBITDA levels will suffer a comparable impact. The impact on Severstal will be smaller due to its smaller exports and high proportion of high-value-added products. Metalloinvest is export-focused but benefits from strong prices on exported iron ore products, which are not subject to the duty. MMK sells mostly domestically, while the Eurasian Economic Union (EAEU) constitutes a notable share of its total exports.
“Some products, like pipes, are not subject to the duty. This means the impact on pipe producers is likely to be neutral to positive since the availability of domestically sourced metal will likely increase,” Fitch said. “Reduced steel exports from Russia may trigger a further price rise given strong global demand and constrained supply. Domestic steel prices will be driven by increasing export benchmarks, higher domestic supplies and lower netback levels. However, the domestic market could not absorb all additional volumes, especially of semi-finished products, and the country remains a net steel exporter,” the agency added.
In June, Russia introduced an export duty of 15 percent (not less than $150/mt) on steel products for the period from August 1 to December 31 this year, valid for exports outside the EAEU, as SteelOrbis previously reported.