Russian Steel Price Jump Prompts Government to Mull Export Tax

Russian domestic steel prices jumped as producers seek parity with exports, prompting the government to consider imposing a levy on shipments overseas.

The price of rebar in Russia rose 17 percent last month, the largest increase among steel products, according to data from Metall Expert Consulting, a research firm with offices in Ukraine and Moscow. Hot-rolled coil climbed as much as 15 percent this month, it said.

“There is a stable demand for the Russian steel on the external markets, thus domestic prices are seeking to match export price,” said Nikolay Filkevich, project head at Metall Expert, which analyzes the domestic steel market.

Producers are trying to close a price gap that by January had widened to about 4,000 rubles ($58.4) per ton of flat steel after the ruble weakened 48 percent in the past 12 months, according to Metall Expert. Prime Minister Dmitry Medvedev said on Jan. 28 that the anti-monopoly agency should look into the price gains, while Industry Minister Denis Manturov said on Wednesday that imposing export duties could help curb domestic increases, TASS news service reported.

VTB Capital estimates that the price of steel exports is currently about 18 percent higher than locally sold products. The price for benchmark hot rolled coil, exported from the former Soviet republics, averaged at $440 per ton in January and fell to $422.5 per ton this month, Metal Bulletin data show.

Client Complaints

Producers will seek to bring local prices back into line with exports after the weaker ruble pushed them lower, OAO Novolipetsk Steel Chief Executive Officer Oleg Bagrin said on Jan. 27. PAO Severstal is increasing ruble-denominated prices, its press-service said Thursday, without elaborating.

The efforts of producers to close the pricing gap is prompting customer complaints and drawn the attention of ministers.

Steelmakers increased prices for rolled steel by 45 percent this year, which is one of the reasons why Russia’s third-largest oil producer OAO Surgutneftegas may boost capital expenditure this year, CEO Vladimir Bogdanov said Jan. 30.

Domestic increases aren’t only driven by the desire to match the export price, the press-service of NLMK, as Novolipetsk Steel is known, said by e-mail. Steelmakers are facing cost inflation, it said, while raw material producers are also exporting more, driving up domestic prices.

“It’s hard yet to say if the export duties will be imposed or not, but the steelmakers understand the situation and will probably find a compromise with the government,” said Sergey Donskoy, an analyst at Societe Generale SA in Moscow.

NLMK, Severstal and OAO Magnitogorsk Iron & Steel declined to comment on possible export duties.

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