London (Platts)--28Jan2011/1000 am EST/1500 GMT
The introduction of an export duty on Russian finished flat steel products, said to be under proposal by the Ministry of Economic Development, may lead local mills to trim output to cut the effect of surpluses being pushed into the domestic market, according to Deutsche Bank. About 60% of Russia's steel exports are semi-finished steel, such as slabs and billets, and there is no export duty reported to be under consideration for this product category, said a note Thursday from the investment bank. A 10% duty is said to be under consideration for hot-rolled and cold-rolled steel, said two newspapers. "If exports of finished steel products becomes unprofitable, those export volumes cannot be diverted to the domestic market due to the limited scope of the Russian market," said Moscow-based analysts in the Deutsche Bank report. "Instead, we expect that companies would decrease production and that domestic steel prices would remain unaffected." The analysts said Russia exported 27.1 million mt of steel in 2010, or 46% of the country's total rolled steel output. Russian media said an export duty was also under consideration for iron ore, at a 30% rate, and that the proposal was sent to companies in December. "It seems likely that the export duty initiative was brought up in response to the numerous complaints from Russian auto producers about rapidly rising steel prices," Deutsche Bank said. Magnitogorsk Steel, NLMK and Severstal are among steel exporters while Metalloinvest exports steel and iron ore to Europe and Asia. REBAR, LONGS Long steels are also likely to be exempt and the export share of products such as reinforcing bar and other steels in that category is small at about 10%, Deutsche Bank said. An international steel trader specializing in the CIS market said that the matter was still undecided but an export duty of such a degree would likely cut purchases of Russian steel, without commenting further. Deputy economics minister Andrey Klepach suggested in a letter to companies imposing a tax tied to world prices or changes in the cost of production of steel, as an alternative to the fixed rate proposed, media reports said. A spokeswoman at the economy ministry in Moscow was unable to comment on the matter when contacted Friday. Deutsche Bank concluded the taxation proposal as reported remains only a proposal at this stage, and "there is no clarity as to when this proposal is to be further discussed by the government and whether or not it will become reality."--Hector Forster, hector_forster@platts.com--Jake Rudnitsky, jake_rudnitsky@platts.comSimilar stories appear in Steel Markets Daily. See more information at http://bit.ly/SteelMarketsDaily