On October 10, the Russian government approved the imposition of temporary duties on grain exports, to the amount of 10 percent (or € 0.022/kg) and 30 percent (or € 0.07/kg) for wheat and barley respectively.
The export duties will come into effect one month after the official publication date and will be effective until April 30, 2008 inclusive.
Although the export duties have been introduced to cope with the rise in domestic bread prices, this government decision will also greatly affect scrap exports. Russian grain exports have increased considerably since the beginning of the year, causing a shortage of ship availability for scrap shipments, and as a consequence have negatively affected freight rates for this raw material. For instance, the freight rate has increased by at least 50 percent since the beginning of the high grain season.
In the interval from the present time until the enforcement date, it is certain that demand for ships from grain exporters will see a further upswing, leaving scrap exporters to deal with even greater scarcity of ships for a certain time.
However, once the duty becomes effective, a softening is likely to be observed in grain exports, making more ships available for scrap exports. Furthermore, as ship availability for scrap increases, the freight rate for this raw material may see a downward movement.