Import duty annulment relieves MMK

Import duty annulment relieves MMK

In an effort to ensure that Russian steelmakers are not choked by rising raw material costs, Vladimir Putin’s 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 Russia’s three main iron ore processing plants, one is owned by Russia’s top steelmaker, Evrazholding, while the other two are owned by Alisher Usmanov’s Gazmetall group. The latter accounts for nearly 40% of Russia’s 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 Moscow’s recent move to really level the playing field for MMK, a duty would need to be applied to iron ore exports.