The initiative that has been discussed in the market earlier this week has become a reality – Russia’s government has adopted a decision to implement export duties for certain categories of products, including steel and raw materials. While earlier there has been a debate on the period of the restriction to be valid, now it is clear that according to the official document, the export tax will be applicable from October 1, 2023 until December 31, 2024.
“The regulation is adopted in order to support the optimal ratio of the local consumption and exports. The imposed decision will help protecting the local market from the unconditional increase of the prices. The flexible export duties will be valid till the end of 2024,” the official statement of Russia’s government reads. However, many in the market agree that this is the move of the government to collect additional money from the steel sector, taking part of the margin from the mills. “They lack the funds to finance the special military operation [war in Ukraine],” a Russian source told SteelOrbis.
As far as metallurgical sector is concerned, the export tax will be applicable to the products like steel slab, billet, most of the long and flat products, pig iron, coal and coke, HBI and iron ore.
The size of duties for the mentioned products to be exported outside of Russia and Eurasian Economic Union are tied to the rubble exchange rate and are as follows:
|
Export duty rate, % |
USD/RUB exchange rate |
|
0 |
less than 80 |
|
4 |
80-85 |
|
4.5 |
85-90 |
|
5.5 |
90-95 |
|
7 |
95 |
Taking into account the current official exchange rate, the duty rate today for exports of all of the above products is 7 percent. “According to the logic of those who has taken this decision, the production cost is in local currency, the exchange rate increased by 10-15%. Therefore in order for no one to be tempted to increase local prices, there has to be a reversed coefficient of the export duty. And in this logic it is single for all the categories,” a local Russian producer commented.
As SteelOrbis mentioned in the previous report from today, September 21, raw materials including coal and pig iron, along with semi-finished steel will be the most affected. For the cargoes declared for exports after October 1, 2023, the exchange rate monitoring period is from August 26 until September 25, and the latest publication results of estimated average exchange rates should be no later than September 27.
Some of the players do not believe there will be a problem for the already booked cargoes by traders, meaning mainly billet and particularly to Turkey and Egypt. “It will affect the mill, not the trader, since the mill is an exporter. The trader booked on FOB and the mill might ask for compensation but I don’t think anyone would agree,” a source said. “For the future it might be a problem,” he added.