The Russian government in the guise of the Russian Ministry of Industry and Energy has given the major steelmakers, according to reports, one month to propose a solution to the current situation of rocketing domestic steel prices; otherwise, the producers may have to face the imposition of export duties on metallurgical products such as scrap and semis. At the present juncture, Russian steel market players seem divided in opinion as to how export duty would impact on the domestic market.
On the one hand, representatives of the major Russian steel producers such as Evraz Group and Severstal believe that an export duty on scrap and semis would not solve the problem of the continuous price rises in the Russian domestic market. For instance, Evraz Senior Vice President for Corporate Relations, Pavel Tatiyanin emphasized that prices in the Russian domestic market are continuing to rise due to the imbalance between supply and demand. According to Mr. Tatiyanin, the Russian steel industry, which is currently working at its full capacity, has no additional capacities at the moment to satisfy the growing domestic demand. Even if the government decides to limit exports of scrap and semis, the Russian steel mills currently have no extra rolling capacities available to re-roll all semis which would be redirected from exports to the domestic market. Prices will see stabilization only when the projects of the major domestic steel players come on steam around 2012. Mr. Anatoly Kruchinin, head of the Russian Steel Division of Severstal, agreed with his colleague from Evraz, stating that only the creation of new finished steel rolling capacities will bring the Russian domestic steel market to equilibrium and thereby stabilize prices.
On the other hand, Russia's largest scrap processor Industrial Group MAIR expressed a different opinion on the impact export duties on raw materials and semis could have on the Russian steel market. According to Victor Makushin, president of MAIR Industrial Group, the export duty on scrap could bring some positive effects to the Russian domestic market, if applied rationally. According to Mr. Makushin, an excessively high export duty could discourage scrap collectors from collection activity, thus leaving the market in even a worse situation than now. On the other hand, a reasonable export duty on scrap may redirect scrap from exports to the domestic producers, thus increasing scrap availability in the domestic market, and thereby reducing scrap prices.