Russian alloy smelters urge rethink on export tax
Several Russian ferro-alloy smelters are urging the government to rethink its plan to levy an export tariff on ferro-alloys from 1 August-31 December, warning that they cannot afford to lower their export prices enough to remain competitive with a 15pc tax factored in.
"We have been scratching our heads for the past three weeks since the tax was announced," one producer said, adding that they are still unsure how to navigate the introduction of tariffs that will render their exports uncompetitive unless they slash prices. "We are trying to find ways to serve our customers," they said, adding that they have no intention of declaring force majeure on existing contracts and have been dipping into the spot market to buy extra ferro-tungsten outside Russia with which to fulfil those commitments.
Several Russian smelters do not have their own mines from which to source feedstock, meaning they are exposed to seaborne spot prices and indexes to buy products such as tungsten concentrate — squeezing their margins and making it even more difficult to offer finished products at a reduced price, the producer said.
Tungsten concentrate prices continue to climb amid tight supply of primary and secondary raw materials, with some offers in Europe now punching as high as $235/dmtu in-warehouse Rotterdam.
Even consumers outside Russia — who do not face the prospect of a new 15pc tariff on their finished product sales — are voicing unease about rising raw material costs, with one commenting this week that tungsten carbide prices are not high enough to accommodate ever-increasing input costs.
The key focal point of the export tariffs — which encompass a wide range of ferrous and non-ferrous products — should be items such as base metals, for which international prices have surged in the past 18 months, a market participant said, arguing that it does not make sense for lower-volume items such as ferro-alloys to also be caught up in the measures — particularly given revenue from the 15pc ferro-alloy export tax will not generate a significant amount of income relative to other products.
Explaining the tariffs on 24 June, the government said income from the duties will be used "to compensate" for rising metal prices in Russia's domestic market. First deputy prime minister Andrei Belousov added that Russia's economy is not ready for an "avalanche-like shock transfer" of global metal prices to the domestic market.
Market participants are monitoring developments to see if the Russian government is willing to review the ferro-alloy component of the tariffs. Even if a formal appeal makes progress, it is possible that the ferro-alloy tax would only be reduced slightly — to 12pc, for example — which would still render Russian export prices uncompetitive against China, a European trader said.
Although the tariffs are being levied in response to sharp increases in international commodity prices in the past year, ironically, it is the tariffs themselves that have generated more uplift to European ferro-tungsten prices than has been seen for some time. Prices for 75pc grade alloy have risen by almost $5/kg since the Russian government's announcement on 24 June, now standing at a three-year high of $38-39.50/kg duty paid Rotterdam.
US ferro-tungsten prices are also moving higher as the tariff looms, assessed at $17.10-18.00/lb fob North America warehouse yesterday, up from $15.80-16.00/lb fob three weeks ago. The US ferro-tungsten market is fairly small compared to other ferro-alloy sectors, but it has no commercial production and so relies heavily on imports — half of which came from Russia in 2020 at 25t.
Other ferro-alloy markets have been less reactive than ferro-tungsten but are monitoring the situation closely — along with this week's civil unrest in South Africa — but without a major impact on spot prices. European prices for low-carbon ferro-chrome did creep up immediately after the government's announcement on 25 June, amid speculation and supply concerns, but have stabilised somewhat amid the summer slowdown at around $1.80-1.90/lb ddp for 60-64.99pc Cr grade and $2.00-2.10/lb ddp for min 65pc Cr grade.
Ferro-titanium traders have moved quickly to get as much Russian alloy trucked across the border as possible before 1 August and prices for Russian grade have crept up in Rotterdam, but slow seasonal spot trade is limiting price movements. Argus assessed Russian grade min 70pc Ti ferro-titanium at $6.00-6.85/kg duty unpaid Rotterdam yesterday, up from $5.25-6.00/kg on 23 June just before the tariffs were announced. This compares with western grade ferro-titanium assessed yesterday at $6.60-7.30/kg duty-free Rotterdam.
Related news posts
US inflation slows broadly in April
US inflation slows broadly in April
Houston, 15 May (Argus) — US consumer price gains eased in April, with core inflation posting the smallest gain in three years, signs the economy is slowing in the face of high borrowing costs. The consumer price index (CPI) rose by an annual 3.4pc in April, easing from 3.5pc over the prior 12-month period, the Labor Department reported on Wednesday. Core CPI, which strips out volatile food and energy, rose by 3.6pc, slowing from 3.8pc the prior month. The easing inflation comes as the Federal Reserve has pushed back the expected start of interest rate cuts after holding its target rate at a 23-year high since July 2023 as the US economy has continued to grow and generate jobs at greater than expected rates. Job growth however slowed to 175,000 in April, the lowest since October 2023, and job openings and wage gains have also slowed while a measure of manufacturing has contracted. The CME FedWatch tool boosted the probability of Fed rate cuts in September to about 72pc today from about 65pc on Tuesday. The energy index rose by 2.6pc over the 12 months ended in April, accelerating from 2.1pc. The gasoline index slowed to an annual 1.2pc in April from 1.3pc The food index rose by an annual 2.2pc, matching the prior month. Shelter slowed to 5.5pc from 5.7pc. Services less energy services slowed to 5.3pc from 5.4pc. Transportation services accelerated to an annual 11.2pc, led by insurance costs, from 10.7pc in the 12 months through March. On a monthly basis, CPI inflation slowed to 0.3pc in April from 0.4pc the prior two months. Core inflation slowed to 0.3pc from 0.4pc the prior three months. Energy held flat at a monthly 1.1pc. Services less energy services slowed to a monthly 0.4pc gain from 0.5pc. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Liberty looks to sell or recapitalise EU rolling lines
Liberty looks to sell or recapitalise EU rolling lines
London, 15 May (Argus) — Beleaguered steelmaker Liberty Steel is looking to recapitalise or divest its main European rolling lines, the company said today. The lines are Liege in Belgium, Dudelange in Luxembourg and Piombino in Italy, and have a capacity of over 2.5mn t, the company said. Liege and Dudelange galvanise hot-rolled coil (HRC) and produce tinplate and blackplate, Magona produces prepaint and hot-dipped galvanised (HDG) products. "The primary objective is to review options for strategic partnerships through long-term HRC feedstock supply contracts, but will also consider and [sic] co-investment and divestment options," Liberty said. Negotiations over at least one of the assets have been ongoing for a number of months, but have potentially stalled at the contract signing stage, sources suggested this week. The company refused to comment on "speculation". As with Liberty's other EU and UK assets, the lines have not been producing anywhere near full capacity, if at all, for a number of years. They have not been supplied with feedstock from the company's own mills. Galati in Romania is operating, but nowhere near capacity, while Ostrava is rolling limited quantities of imported slab with the aid of third-party financing. As far back as June 2021, Belgium's Walloon government discussed loaning Liberty Steel an undisclosed fee to continue operating Liege-Dudelange, subject to the organisation of a sales procedure being started. Walloon's investment firm Sogepa said the loan would be subject to "strict conditions", including the organisation of a sale, but the loan was not finalised in the end. That same month, Liberty merged the downstream assets of Dudelange, Liege and Piombino into its Galati organisation. At the time the company said this would see Galati become the primary supplier of HRC to the rolling lines. The difficult market environment in Europe is compounding the difficulties faced by Liberty. Last week it mothballed its merchant bar mill in Scunthorpe, UK , as first reported by Argus . In reality, the mill has not produced anything for years. At Liberty's Speciality Steel business in south Yorkshire, UK, around 7,000t has been produced this year, out of nameplate capacity of 1.2mn t/yr. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
VW idles Brazil auto plants as floods hit parts supply
VW idles Brazil auto plants as floods hit parts supply
Sao Paulo, 14 May (Argus) — Persistent heavy rains in Brazil's Rio Grande do Sul led Volkswagen to announce collective vacation for workers in three of its local plants as the automaker struggles with a lack of parts made in the flood-hit state. The Anchieta, Taubate and Sao Carlos facilities, in southeastern Sao Paulo state, will have collective vacation starting 20 May as floods forced auto part suppliers to stop production. "Due to the heavy rains affecting the state and people of Rio Grande do Sul, some Volkswagen do Brasil parts suppliers, with factories installed in the state, are unable to produce at this time," the company said on Tuesday. Volkswagen declined to comment on which auto parts suppliers were affected by the floods. Volkswagen's Sao Jose dos Pinhais facility, in Rio Grande do Sul, will remain operating, the company said. Heavy rains that began flooding Rio Grande do Sul in late April persisted over the weekend , continuing to wreak havoc in the state. Rains reached an accumulated 123mm (4.8in) on 10-12 May in the state capital Porto Alegre, according to Brazil's national meteorological institute Inmet. Some areas experienced around 80mm of rain on 12 May alone, according to the US National Oceanic and Atmospheric Administration. Showers lessened but continued on 13 May, reaching 35mm in some parts of the state. The extreme weather has left 148 dead and 124 missing, according to the civil defense. Over 538,000 people are displaced. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Anglo American to exit from coal, Ni, platinum: Update
Anglo American to exit from coal, Ni, platinum: Update
Adds details of Anglo American's latest plan to demerge or sell its assets Singapore, 14 May (Argus) — UK-South African mining firm Anglo American has announced plans to exit its coal, platinum, nickel and diamond businesses, shortly after rejecting Australian resources firm BHP's latest takeover bid. Anglo American wants to sell its coking coal business in Australia, which includes the 6.5mn t/yr Moranbah and 5mn t/yr Grosvenor mines in Queensland. The firm also plans to demerge Anglo American Platinum, as well as sell or demerge its De Beers diamond business, it said on 14 May. Anglo American will also slow investment in its Woodsmith polyhalite fertilizer project in the UK, where it was previously targeting first commercial output in 2027 . It is also exploring options for care and maintenance as well as divestment of its nickel assets in Brazil. The move to "accelerate the delivery of consistently stronger shareholder returns" with the latest plan comes on the back of a takeover bid by BHP. Anglo American turned down a revised £34bn ($42.7bn) takeover proposal from BHP on 13 May because it "continues to significantly undervalue Anglo American and its future prospects". It earlier rejected BHP's £31bn all-share offer for the same reason. "The latest proposal from BHP again fails to recognise the value inherent in Anglo American," Anglo American chairman Stuart Chambers said on 13 May. Anglo American shareholders are well positioned to benefit from increasing demand from "future-enabling products", Chambers added. Copper was the second-highest contributor to Anglo American's earnings last year, accounting for 32pc of its earnings before interest, taxes, depreciation and amortisation, after iron ore. BHP's latest offer represents a total value of around £27.53 per Anglo American ordinary share, including £4.86 in Anglo Platinum shares and £3.40 in Kumba shares, BHP said on 13 May. The takeover proposal came with a requirement for Anglo American to complete two separate demergers of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore — its assets in South Africa — to Anglo American shareholders. "This leaves Anglo American, its shareholders and stakeholders disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover," Anglo American said. By Reena Nathan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more