Russian Scrap Metal Dealers Protest Export Ban

Exporters of ferrous metal scraps in the Russian Far East are fighting a recent State Customs Committee order that halted their multi-million-dollar business in order to protect a local steel producer.

Exporters say the order, which prohibits the region's five largest ports from handling scrap metal exports, contradicts Russia's efforts to build a free market economy while a Cabinet minister said it harms Russia's bid to accede to the World Trade Organization.

The order that took effect on May 18 put a stop to a business that brought scrap metal exporters $62 million last year, according to the State Customs Committee.

Instead, it has given a boost to Amurmetall, a plant in Komsomolsk-on-Amur, by making it a near-monopoly buyer of ferrous metal scraps from the local dealers.

Amurmetall previously complained that it couldn't stock enough metal waste to make steel. Facing closure, it demanded customs intervention and was supported by presidential envoy in the Far East Federal District Konstantin Pulikovsky and Viktor Ishayev, governor of the Khabarovsk region, which includes the plant's hometown.

The customs office took up their cause wholeheartedly. "You can't take metal out of the country and sell it overseas for peanuts while Russian plants stand idle," said Viktor Vuglyar, chief of the customs department in the Far East.

(In fact, Amurmetall pays less for scraps than its foreign competitors.)

The scrap metal ban operating at five major ports - Vladivostok, Nakhodka, Vostochny, Vanino and Sovetskaya Gavan - leaves just three small shallow harbors to deal with the huge export potential. They are the ports of Slavyanka, Posiet and Zarubino.

"Making us move to those ports is in essence a prohibitive measure," said Yevgeny Pozhitkov, director of Primorvtorsyryo, one of the largest scrap metal dealers in the Far East. "This policy runs counter to the idea of free market."

According to the customs authorities, exporters last year shipped abroad 870,000 metric tons of scraps - about the same amount as Amurmetall needs. The scraps were sold mostly to South Korea and Taiwan.

Pozhitkov said the three ports that remain open could handle only 100,000 tons per annum, and they need to be equipped for the task.

Amurmetall meanwhile has been celebrating. The plant's scrap metal procurement division chief Vitaly Polezhayev said the company had been able to increase scrap metal purchases and will reach the required levels next month.

Amurmetall's economic planning chief Marina Tsyganova said the measure will allow the plant to haul in profits of $9 million on revenues of $125 million this year.

This success comes because the ban allows Amurmetall to buy scraps at $60 per ton, while according to the customs office exporters sold them abroad at $71 last year.

The customs order hit heavily at some of the ports under the ban because they were very dependent on scrap metal. For instance, Vladivostok's Fishing Port said scraps accounted for a third of its annual business.

Seeking a compromise, Primorye Governor Sergei Darkin and exporters, supported by Trade and Economy Minister German Gref, asked for at least two major ports of Vladivostok and Nakhodka to be reopened for ferrous scrap business.

In a letter to the customs committee, obtained by The Vladivostok News, Gref stressed the importance of balancing the interests of scrap metal exporters and domestic consumers of the resource.