Russia mulls raising export duty on ferrous scrap to $324/mt: Ruslom

The Russian government is looking to nearly triple its export duty on ferrous scrap to Eur290 ($324/mt), but also bring in a three-month quota for up to 800,000 mt that could be exported at a lower tariff of Eur100/mt currently, an official at the national recycling association Ruslom told S&P Global Commodity Insights March 30.

The new Eur290/mt tariff and the three-month export quota are expected to come into force May 1, and stay effective through end-July.

The further revisions to both tariffs and quota volumes will depend on market conditions, according to Ruslom.

The Eur100/mt duty, in effect since Jan. 1, 2022, has already impeded Russian scrap exports. At 40,000 mt in January-February, the exports plunged 94% from just over 710,000 mt shipped out in the corresponding period last year, according to Ruslom data.

With the ongoing war in Ukraine, deliveries of scrap from the Black Sea are completely blocked, and deliveries through the port of St. Petersburg are also almost non-existent, except in isolated cases.

Supplies to South Korea -- the second largest buyer of Russian scrap after Turkey -- remain uncertain too as the country is currently reluctant to buy Russian scrap, according to the association.

Yet, Ruslom views the move to establish a quota as an improvement compared with a complete ban that would be achieved with the base tariff nearly tripling, should there be no room for affordable exports.

"The domestic market for scrap has declined and there is simply no room for all the scrap that could be collected," Ruslom.com's director Viktor Kovshevny told S&P Global.

Nearly 2.9 million mt scrap were collected in Russia in January-February 2022, down 30% on the year, pressured by the export tariff hike in January, along with a drop in domestic consumption.

However, the pressure looks set to ease. Over the first two months of the year, scrap prices advanced sharply. On March 29, the Platts Turkish imports of premium heavy melting scrap were assessed at $654/mt CFR, according to S&P Global. That was $190/mt higher compared to the Dec. 29 assessment of $463/mt CFR.

The $190/mt price increase largely offsets the existing tariff and with the prevailing pricing trend, exports are becoming increasingly possible even under the Eur100/mt duty, S&P Global noted.

The 800,000 mt three-month quota corresponds to the quarterly volume Russia used to sell outside the Eurasian Economic Union in 2021, so the move may effectively restore scrap exports to levels seen last year, according to Ruslom.

It is also meant to maintain collection at a time when domestic demand for scrap is expected to decrease to 9 million – 11 million mt this year, from 13.3 million mt in 2021, Ruslom estimates.