Russian Proposed Export Duty Will Harm Industry

According to industry participants, Russia's decision to apply a 15% duty on all major export goods of ferrous and non-ferrous metals within six months will negatively affect the industry and displace Russian steel products from the world market.

The Russian metallurgical plant NLMK is considering the possibility of applying a 15% export duty on the entire range of products, including products not intended for domestic trade, such as cast iron and square billets, as fiscal in nature. He explains that this has the purpose of extorting capital from the industry.

"The application of the duty will neither increase supplies to domestic buyers, nor reduce domestic prices," the company said in a statement.

NLMK also notes the negative impact on the electric steel-making production, which uses expensive scrap as the main raw material. The duties could lead to negative margins for EAF and the risk of reduced export of billets in the absence of domestic consumption. In turn, this could force producers to change their investment plans, which will lead to a decrease in regional revenues.

In addition, in anticipation of the normalization of world steel prices, these measures will lead to a reduction in Russian exports on the world market and their replacement by other Ukrainian and Turkish suppliers, which will complicate a possible return.

Severstal CEO Alexei Mordashov expresses the hope that these measures will not complicate the export of Russian steel, which is already facing serious global trade barriers. He hopes that the decision will also contain measures that will support Russian metallurgy and its development. He notes that many global analysts are already grateful to the Russian government for "such a gift for European steel producers," and notes that this initiative is likely to lead to an increase in world prices.

Traders, meanwhile, agree with the latter, arguing that export duty restrictions on Russian steel will lead to lower affordability and higher prices.

“This will reduce supply and cause prices to rise,” says an experienced trader. “The only reason the government would do this is to lower domestic prices for rebar by increasing domestic supply. And they already have a healthy domestic market, so there is no need to export. One of the main reasons for the decline in exports of Russian billets in recent years is the growth of domestic demand and supply of valves in Russia. Wire rod prices may fall, but I doubt that this will affect them, since Russia is banned or “quoted” on the most expensive markets in the EU and the US. ”