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Sources Said Russia's Proposed Export Tax Would Hurt The Industry

Sources Said Russia's Proposed Export Tax Would Hurt The Industry

Russia's decision to apply a 15%duty on all major ferrous and non-ferrous metals exports for six months will adversely impact the industry and force Russian steel products from the global market, industry participants say.

Russian steelmaker NLMK deems the possibility of a 15% export duty applied on the full product spectrum, including products that do not trade domestically such as pig iron and square billet, as being fiscal in nature. It has the purpose of exaction of capital from the industry, it explains.

"The application of duty will lead neither to increased supply to domestic buyers, nor will it reduce domestic prices," the company says in a statement.

NLMK also notes the negative effect on electric steelmaking, which uses expensive scrap as its main feedstock. Duties could result in negative margins for EAF mills and the risk of billet export reduction, in the absence of domestic consumption. Intern, this is likely to force producers to amend investment plans, leading to lower regional revenue.

Furthermore, in anticipation of normalization of global steel prices, the measures will lead to Russian exports decreasing in the global market, and fellow Ukrainian and Turkish suppliers replacing them, making the eventual return difficult.

Several chief executive Alexey Mordashov expresses hope the measures will not make Russian steel exports, which already face major trade barriers globally, more difficult. He hopes the decision will also contain measures that will support Russian metallurgy and its development. He notes that many global analysts are already thanking the Russian government for "such a present for European steelmakers”, and notes that the initiative will likely push global prices up.

Meanwhile, traders agree with the latter, claiming the restriction of Russian steel exports by export duty will lead to lower availability and higher prices.

"This will tighten supply and make prices rise,” a seasoned trader says. “The only reason why the government would do that is to dampen domestic rebar prices by increasing domestic supply. And they already have a healthy domestic market, so no need to export. One of the main reasons why Russian billet exports have declined over the years is the growth in Russian domestic demand and supply of rebar. Wire rod prices mayfall, but I doubt they will be impacted, as Russia is barred or 'quotarised' in the highest-paying EU and US markets already.”

Short comments: Steel price has been a hot topic of discussion for us recently. We certainly don't want to see the situation of lower availability and higher price. However, we will do a good job in cost control to provide customers with high-quality products and prices.

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