The steel export tax initiative in Russia reported last week was approved by the Russian authorities late on June 25. The measure, suggested as a means to curb the rapid price increases for steel in the local market in Russia, will be imposed for the period from August 1 to December 31 this year.
The base export rate is 15 percent and each product will be subject to a specific duty component in US dollars per metric ton. This will be calculated depending on the product group and the metal type (for non-ferrous metals) or the extent of processing required for materials (for ferrous metals) and taking into account the dynamics of global prices within the first five months of 2021.
The specific duty component for HR flats, semis, and rebar will be no less than $115/mt, while for cold rolled flats and wire it will be not less than $133/mt, and for stainless steel and ferroalloys it will be not less than $150/mt. In the non-ferrous metals segment, the minimal rate is $1,226/mt for copper, $2,321/mt for nickel, and $254/mt for aluminum.
The duties will be applicable to exports outside the Eurasia Economic Union (EEU) and Russia will hold negotiations with the EEU partners in order to minimize the re-export risks.
Since the imposition of the duty is now definite, steel market players are trying to evaluate the possible immediate effects on prices and equilibriums in the markets. Logically, prices from Russia for the key steel products are expected to increase, but not all suppliers are expected to give firm offers, but prefer to wait. Southeast Asian buyers have told SteelOrbis that Russian billet suppliers have completely withdrawn their offers for now. In the hot rolled coil segment, suppliers are also waiting though some expect ex-Black Sea prices to again hit above $1,000/mt FOB.
Overall, in the HRC segment mills foresee an increase in export prices in the short term and a decline in local offers, due to the protective measure. The local HRC market in Russia is quite saturated with local origin material, and so hardly any large tonnages will be redirected to the domestic market from exports. Moreover, some market players expect there will be a certain re-balancing of the market within the EEC. “The local market today includes the Customs Union countries. Prices within the Union will most probably decrease below FOB levels and Ukraine will leave all these markets for distant exports, thus providing some space for Russian mills. But selling all volumes to the local market will not work, and so exports from Russia will still be seen, though in a lower volume,” a Russian flats producer told SteelOrbis.
In the billet segment, some market sources expect the short-term effect will be positive and that prices will be supported by the imposed export duty, since Russia is an important global market player. Moreover, there may be a positive effect on steel scrap prices, especially in markets where the steel mills balance scrap usage and semis imports, SteelOrbis understands.