Russia, in surprise move, to abolish, reduce ferro-alloys export taxes

The Russian government is proposing to abolish or reduce its recently-imposed export taxes on ferro-alloys - with the exception of ferro-silicon - in a surprise decision announced on Tuesday September 7.

No firm date was given for the introduction of the planned changes.

The Russian government introduced duties on 340 steel and non-ferrous metals outside the Eurasian Economic Union (EAEU) in June 2021, with the tariffs coming into effect from August 1 and lasting until December 31.

The duty base rate was set at 15%, with a specific rate of $150 per tonne on ferro-alloys such as ferro-titanium. The move was the latest in a series of steps by countries around the world to tackle surging prices for raw materials and other key goods.

Responding to industry concerns, the latest official government notification, published on the government website on Tuesday, proposes to abolish export duties on ferro-titanium, ferro-molybdenum, ferro-tungsten, ferro-niobium and iron powder.

The notification proposes to cut export duties for ferro-chrome and ferro-manganese. In relation to ferro-chrome the export duty rate on high-carbon would be 5%, but not less than $57 per tonne; for low-carbon (0.05% C) ferro-chrome it would be 5%, but not less than $134 per tonne; for low-carbon (0.05-0.5% C) ferro-chrome it would be 5%, but not less than $109 per tonne; and for high-carbon ferro-manganese the export duty rates would be 5%, but not less than $49 US per tonne.

Under the proposal ferro-silicon is unaffected and the existing export duties as originally imposed would remain in place.

In June, the Russian government said that income from the new export taxes would be used to compensate for increasing metal prices in its domestic market and first deputy prime minister Andrei Belousov said the Russian economy was not ready for an “avalanche-like shock transfer” of international metal prices to the domestic market in Russia.

But in July, Russian ferro-alloy smelters urged the government to reassess its plans for the new export tariffs on ferro-alloys, warning that they could not afford to cut their export prices enough to be competitive with the new tax factored in to their costs.

“The sub-committee on Customs Tariff and Non-Tariff Regulation [supports] the initiative to reduce export duties on a number of ferro-alloys and carbonyl iron, the decision on which was made at the end of June,” the official government notification says.

“For certain items, the duties are planned to be zeroed. The adjustments are… in response to requests from Russian manufacturers, taking into account market fluctuations that have occurred in recent months on world markets. For example, the main raw material for ferro-chrome is chromium concentrate, [which is] imported into the Russian Federation [and for which] world prices have increased significantly, while the alloy itself is mainly export-oriented. As noted at the meeting of the sub-committee, this decision will support the production of [the] relevant products [and] employment at enterprizes,” the notification adds.

The deputy minister of the Russian Federation’s Ministry of Industry & Trade, Viktor Yevtukhov, said ferro-alloys were necessary raw materials for both smelting carbon and alloy steels.

“The need to adjust export duties is associated with the dependence of domestic producers on imported raw materials, for example, on manganese and chrome ores, as well as with the export orientation of the industry.,” he said.

“The reduction in duties will help maintain the existing rates, [along with growth in the] production and export of products, and will allow… for investment [in the] development of companies in due time – for example, the construction of a new workshop for the production of medium- and low-carbon ferro-manganese at JSC Satka Iron Smelting Plant,” he added. 

According to the notification on the government website, the combined duties on the export of ferrous and non-ferrous metals were introduced until the end of the year as a temporary measure – aimed at compensating for the increase in prices for metal products in the domestic market.

“The Ministry of Economic Development [and] the Ministry of Industry & Trade constantly monitor the dynamics of world prices, as well as analyzing the requests of metallurgists in terms of adjusting duties. For example, a decision has already been made and entered into force on August 16 to cut the specific duty rate on pig iron to $54 per tonne.”

In terms of ferro-titanium, on average, Europe (including Scandinavia and Turkey) has imported around 1,500 tonnes of ferro-titanium from Russia each month for the past three years, with 1,700-1,800 tonnes imported per month in the first four months of 2021, according to industry estimates – although trade sources said some of those imports could be sold on to countries outside of Europe. 

In 2020, total ferro-titanium exports from Russia to Europe amounted to about 20,000 tonnes.

European ferro-titanium production is around 20,000 tonnes per year and market sentiment suggests there could be some inter-merchant short covering before steelmakers reveal their buying needs through to the end of December. If European ferro-titanium producers have any spare production capacity they could adjust their operations, depending on the rate of exports from Russia and domestic consumer demand in Europe.

“It would take time for ferro-titanium to reach the [European] market due to limited production and restrictions on containers and truck availability,” a UK alloy producer said.

Fastmarkets’ price assessment for ferro-titanium, 70% Ti, max 4.5% Al, ddp Europe was $7.70-8.10 per kg on Wednesday September 1, compared with $7.30-7.60 per kg on June 30 –  not long before the Russian export taxes took effect. 

The ferro-titanium price reached a 2021 high of $7.90-8.20 per kg on February 17, before gradually weakening in line with demand until late May. Back in August 2020, the price was $3.30-3.85 per kg.