The prospect of a Russian export tax causes concern in the metals markets from BOB Wigs's blog

Metals market participants are taking stock of Russia's plan to impose export duties on a variety of ferrous and non-ferrous products exported outside of the Eurasian Economic Union (EAEU), with nickel and aluminum prices rising sharply today and some ferro-alloy traders scrambling to get Russian material trucked across the border before the duties take effect.

In order to protect the domestic market, Russia's Ministry of Industry and Trade proposed duties that would be in effect from 1 August to 31 December 2021. The income from the duties will be used to compensate for rising metal prices in Russia's domestic market, according to the ministry, with first deputy prime minister Andrei Belousov stating that Russia's economy is not prepared for an avalanche-like shock transfer of global metal prices to the domestic market.

The recommendation of the ministry covers a wide range of products, including steel, ferro-alloys, copper, nickel, and aluminum. The base tax rate would be 15 percent, with specific duties levied on each product — at least $150 per tonne for ferro-alloys, at least $1,226 per tonne for copper, at least $2,321/tonne for nickel, and at least $254 per tonne for aluminium tube.

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Aluminium premiums will be adjusted.
Because Russia is a major supplier of primary aluminium seamless to net-importing regions, there is likely to be an impact on global aluminium premiums as well.

According to national imports statistics, the EU sourced 9.31 percent of its unwrought aluminum imports from Russia last year, although that figure has been lowered as a result of the economic impact of Covid-19 and the attractiveness of prices in Asia, which have both increased Russian imports in the past two years.

According to an analyst, because Rusal is a marginal supplier to many net-importing regions and countries, global premiums will have to be increased by an equivalent amount. Because Russian metal is granted that status in the EU, Russian imports into Europe account for a significant portion of the region's duty-free aluminum market. Therefore, duty-unpaid premiums are likely to continue to close the gap between them and duty-paid premiums, which nominally stands at 3 percent of the LME aluminium price in line with the duties but has narrowed as the duty-unpaid market has tightened this year, partially as a result of more Russian metal making its way to Asia and other regions outside Europe.

Argus' estimate for duty-unpaid aluminum premiums in Europe is $205-215/t, while the estimate for duty-paid premiums in Europe is $250-260/t. The duty would be slightly more than $70 per tonne of aluminum at current LME prices.

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By BOB Wigs
Added Jul 19



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