Moscow Proposes Cuts To Ferro-Alloy Export Duties

Russia’s ministry of economic development is proposing cuts to its export duties on ferro-alloys, just over a month after they were imposed on a variety of metals to help support domestic industry.

The ministry’s subcommittee on customs tariff and non-tariff regulation is proposing that the ferro-alloy export duties – which were set at a base rate of 15pc from 1 August-31 December – now be reduced or removed altogether, citing requests from Russian manufacturers and ‘market fluctuations that have occurred in recent months’. ‘For example, the main raw material for ferro-chrome is chromium concentrate imported into the Russian Federation, for which world prices have increased significantly, while the alloy itself is mainly export-oriented,’ the subcommittee said.

Its proposal recommends that the duty on high-carbon ferro-chrome be lowered to 5pc or no less than $57/t, and for low-carbon ferro-chrome duty to be cut to 5pc or no less than $134/t and $109/t for 0.05pc carbon and 0.05-5pc carbon, respectively. It advises that no duties be levied on certain noble alloys including ferro-tungsten, ferro-molybdenum, ferro-titanium and ferro-niobium, as well as iron powder.

Markets remain muted

The government’s announcement of the tariffs back in June jolted several markets, sending prices of several ferro-alloys higher. But the subcommittee’s latest proposal has so far received a mixed reaction from market participants, and prices have not reacted given no decision has been finalised.

One producer welcomed the cuts, saying the tax is making them uncompetitive in its current form. ‘When you calculate the numbers, it is a 10-15¢ difference compared to other sources. There is no way to include it for current contracts, so we have to eat those costs and it takes a big chunk of our profit margin,’ the producer said. When it came to the spot market ‘we have to price higher and people are not willing to pay that much,’ they added.

Others echoed this view. ‘Everyone is worried about next year,’ one ferro-chrome trader said. ‘People may lose market share if they keep it [duties] because prices are not sustainable at current levels.’

Prices for some ferro-alloys rose significantly as the tariffs were first announced and then imposed – not just because of the tariffs but they have certainly played a part. Prices for min 65pc Cr low-carbon ferro-chrome were assessed at $2.80-2.95/lb ddp Europe works on 2 September, up from $1.85-1.95/lb ddp on 30 June. Russian grade ferro-titanium followed a similar trend, currently at $6.90-7.40/kg du Rotterdam from $5.25-6/kg on 28 June.

Meanwhile, European noble alloy buyers said Russian sellers might be more aggressive in long-term contract negotiations for the year ahead, as the removal of tariffs on products such as ferro-tungsten would allow Russian sellers to be more competitive again.

But for now, shipping constraints remain a major concern for Russian ferro-alloy suppliers, which could dampen the impact of any tax reductions or removals, market participants warned. ‘Even if there is a large tonnage of lower-priced Russian ferro-titanium out there, it will take time to bring it over. It takes us ages to find transport and then to ship over. Sometimes up to a month and a half, when it used to take 10 days,’ one trader said.