Russia reduces steel production to 2020 levels

Since the beginning of the year, steel prices in Russia have fallen by more than a third and rolled back to the level of 2020, the Russian Steel Association confirms.

“Steel prices have fallen by 35% since the beginning of the year, while production costs have risen by almost 50%,” Andrey Leonov, vice president of the Russian Steel Association, told TASS. "In June, the decline in production of Russian steel companies has already amounted to 20-50% year on year."

Earlier, Russian Deputy Finance Minister Alexei Sazanov said that the abolition of the excise tax on liquid steel is not yet possible. However, the Ministry of Finance is ready to discuss changing the tax formula in the fall.

The Russian authorities have set the excise rate on liquid steel at 2.7% from 2022, and also introduced a new level of severance tax on iron ore at 4.8% and on coking coal at 1.5%.

The State Duma Committee on Budget and Taxes rejected the amendments of a group of deputies, which imply a return to the system of taxation of metallurgists that was in force in 2021. This would mean a reduction in the mineral extraction tax and the abolition of the excise tax on liquid steel.

The Ministry of Industry and Trade and the Ministry of Finance of Russia planned to study the cash flow of metallurgical enterprises by the end of June in order to determine the need for support measures.

Industry Minister Denis Manturov explained that the financial results of metallurgists in January-April are not bad compared to the figures for 2021, but nevertheless, there is a negative trend “primarily due to the ruble exchange rate.”

Earlier, he noted that in June the reduction in steel production amounted to 25% compared to April due to low demand.

MMK previously said it expects a 40% reduction in steel production in June to 550,000 tons (see Kallanish passim). Severstal has already confirmed that its production fell by 20-25% last month. NLMK said that this year Russia will reduce steel production by more than 11 million tons, which is 15% less than last year.