Russia threatens scrap export ban

OREANDA-NEWS. June 10, 2015. The Russian government has added scrap metal to a list of "commodities essential for the domestic market… for which temporary export restrictions or prohibitions may be set in exceptional cases".

Signed by prime minister Dmitry Medvedev last week, the document includes all grades of ferrous scrap and scrap of basic and minor metals. It allows the government to implement the restrictions at any time. The plan was presented earlier this year by Russian ministry of industry and trade Minpromtorg.

"There is a shortage of scrap in some Russian regions. Including ferrous and non-ferrous scrap in the list [of essential commodities] enables us to apply non-tariff regulations preventing a critical scarcity of domestic scrap and price increase for steelmakers and related industries. It will also allow, if necessary, prompt decisions aimed at reducing the shortage and increasing the productivity of Russian metallurgical enterprises," Minpromtorg said.

A bill for a temporary restriction or ban on exports of ferrous and non-ferrous products, including scrap, was developed in February and expected to be approved in April. The latest move is a belated reaction to the short-term scrap price surge in late-January and early February, market participants said. Ferrous scrap exporters increased purchasing prices for A3 grade scrap to 15,000 roubles/t (\\$266/t) cpt St Petersburg port amid tight supplies and some fresh demand at home, forcing domestic steelmakers to follow suit.

"That was a two-week-long surge, so the government's move seems a little meaningless — there is no shortage in the market at the moment and no expectation of a shortage," an exporter said. Exporters' purchasing prices at St Petersburg are assessed at Rbs10,000–10,500/t cpt.

Another issue is the confusion of ferrous and non-ferrous scrap dynamics in the document — the Russian ferrous scrap market has been bearish over the spring months, closely following finished products markets, forcing some steelmakers to put out tenders substantially lower than market prices to prevent suppliers from offering. But the non-ferrous scrap market has seen a shortage of supplies.

"The government could not increase duties or impose a scrap export ban because it would breach World Trade Organisation rules, so they are using the ‘temporary' basis, which, if applied, could linger endlessly. But it does not make sense in the current market and political situation. Sharp restrictions of ferrous scrap exports may lead to scrap collection reduction, price instability and problems for steelmakers in European markets, instead of the desired higher levels of scrap staying in Russia," Russian scrap association Ruslom said.

The export price for Russian A3 grade scrap was assessed by Argus yesterday at \\$247/t fob Black Sea, down by \\$4.5/t on the month. Russian domestic scrap consumption totalled 26.5mn t last year, according to Minpromtorg, while exports were 4.2mn t.