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World Scrap Congress: Russian Duties Limit Trade

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Export laws, domestic demand combine to keep Russian scrap at home.

November 6, 2008

Scrap flows from Russia are likely to remain tepid, as the nation’s leaders continue to impose 30 to 50 percent export duties on outbound scrap.


Two Russian speakers at the World Scrap Metal Congress brought little encouragement that Russia’s trade laws will change anytime soon. “How can one imagine any government talking about higher duties for a product when there are already duties from 30 to 50 percent on the market for eight years,” remarked Ildar Neverov of Siberia Metals.


According to Neverov, copper and aluminum scrap exporters have to pay a duty of 50 percent of the scrap’s value, while nickel exporters face a 30 percent charge.


Neverov, a trader of nonferrous metals, also noted that the Russian government has begun investigating stainless steel maker Mechel for tax auditing purposes. That will likely disrupt the company’s plans to expand production that would have increased its demand for stainless steel scrap.


The company had planned to grow well beyond its 300,000 metric tons per year production between now and 2011, but “nowadays nobody knows what the company will do in these difficult times,” said Neverov.


Russia’s ferrous scrap industry has also seen its export activity dwindle, according to Lev Chesalov, deputy director of the Recycling Materials Association in Russia and chief editor for the Rusmet Group.


He noted that Russia’s ferrous scrap export volume decreased from 13.8 million tons in 2005 to 7.7 million tons in 2007.


On the ferrous side, domestic markets for scrap have strengthened because Russian steel mills have been producing more steel, and more if it is being made in electric arc furnaces (EAFs).


The amount of Russian steel made in EAF has jumped from 8.6 million metric tons in 2000 to 19.3 million in 2007. The new EAFs in Russia helped increase the nation’s demand for ferrous scrap from 16 million tons in 2004 to 22 million in 2007.


As in the rest of the world, prices paid for ferrous scrap by Russian mills have declined rapidly. “Russian mills pulled down their prices significantly to a very low level” in October, according to Chesalov.


The World Scrap Metal Congress, organized by Terrapinn Pte Ltd., was held in Shanghai Nov. 3-4, 2008.


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