Russian scrap firms oppose potential export ban

Russian scrap metal association Ruslom mounted a renewed objection to a potential ban on all ferrous scrap exports under consideration by Russia's economy ministry.

A ban of ferrous scrap exports would have serious negative consequences, including possible losses of about $1.3bn in earnings from export activities totalling 5.2mn t/yr at a forecast average price of $250/t and a 50pc fall in domestic scrap collection rates, Ruslom said.

Ruslom has suggested that the ministry consider an alternative to a total ban if it deems that some export restrictions are required. The association proposed a temporary six-month scrap export restriction during the seasonally low activity period for Russia's domestic and export market from 1 October 2019 to 1 April 2020.

The proposal contains a limit on the restriction to a maximum of 520,000t, or around 10pc of all ferrous scrap exported by Russia in 2017. It would consequently be compliant with World Trade Organisation (WTO) non-tariff regulations and defined as a seasonal quota, as it would be implemented during the low scrap generation season.

Ruslom's appeal was a response to Russian tube industry foundation FRTP's proposal to the government to ban all exports of ferrous scrap from Russia for six months from 1 May, which is the time of high scrap purchasing activity both at home and in the export markets. The ban was suggested in order to curtail price increases that increase steelmakers' costs because of tighter availability amid increasing demand.

Banning scrap exports on these terms would be against international trade laws, restrict scrap procurement companies' cash flow and so affect their scrap collection capability, and consequently affect scrap end users, Ruslom said.

A survey of Russian scrap market participants indicated that they agree with Ruslom's proposal.

Exporters said there is not a single legitimate reason to introduce a ban for ferrous scrap exports — both within the WTO and the customs economic space between Russia and Belarus, which is one of the largest recipients of Russian ferrous scrap exports, taking around 1.4mn t/yr.

"The factor of changes in global and domestic prices for scrap is not a legal basis for restrictions on export-import operations. The price is a market mechanism that cannot be artificially limited without violating the principles of the free market and competition," an exporter said.

Ruslom pointed out that Russian scrap pricing is not speculative and that regional price hikes correlate strongly with seasonal factors. A recent Argus analysis of Russian scrap pricing showed that northwest Russian exporters' dockside prices track the Russian domestic market closer than the export market over the winter period when overseas demand is low and freezing conditions persist.

Russia's economy ministry has yet to set the timeframe for reviewing the proposals. The Russian industry ministry in early February conducted a preliminary meeting with scrap market participants. Of the nine largest metallurgical companies — as such the largest domestic ferrous scrap buyers — only three support an introduction of the export ban, while the remainder are opposed.