Russia to implement ferrous scrap export quotas

Russia's government intends to implement a system of regional quotas for ferrous scrap exports from the beginning of July, according to market participants.

The industry and trade ministry agreed yesterday to establish quotas for ferrous scrap exports from Russia's far east, northwest, central European and southern regions.

The quotas will be in place for six months from 1 July. The government has yet to officially confirm the implementation, but several sources familiar with the matter said it is poised to go ahead.

Amurstal, which is the only steelmaker in Russia's far east and would be one of the main beneficiaries of any export restrictions, said on one of its social media accounts that the quota will be introduced.

Deputy industry and trade minister Viktor Yevtyukhov said last week that the ministry was preparing a proposal for regional quota volumes, but no firm details have yet emerged.

None of the St Petersburg exporters contacted by Argus today had been informed that a quota will be enforced, and several indicated that they would not expect such a move to significantly impact their business in the near term.

Discussions surrounding restrictions of ferrous scrap exports have been more closely centred on Russia's far east in recent years.

Amurstal — a 100pc scrap-fed mill that is estimated to require around 100,000 t/month — has periodically struggled to source local scrap at economically viable prices and has lobbied for scrap export restrictions for several years.

In 2018, the government limited the number of ports in the country's far east through which ferrous scrap can be exported, but that had no effect on domestic availability as suppliers continued to find exports more attractive, despite the restrictions.

"There is always cut-throat price competition for available scrap in the far east as the prices which buyers from abroad, primarily from South Korea, are ready to pay are usually higher that those Amurstal would pay," a market participant said. "Such a struggle can only be won by higher prices, which dent the steelmaker's cost-effectiveness."

Amurstal's scrap receipts by rail reached 169,600t in the first quarter, only slightly more than the 167,200t delivered — by rail and road — to Russia's far east ports of Vladivostok and Nakhodka for export. The steelmaker sourced this tonnage after upping its purchase price in February.

Market participants said the decision to implement export quotas will also have been influenced by a proposal for a temporary ferrous scrap export ban submitted by Russia's steel pipe-makers in December to the economy ministry, which signalled it was planning to evaluate such a possibility in January. The initiative was broadly opposed by Russian scrap firms and other ferrous market participants, with no further news heard until last week.

"It is understood that export restrictions in the form of regional quotas aim, in the first place, to support Amurstal, whose usual troubles with scrap supply are widely known," an industry source said. "But it will bring problems to all exporters all over the country one way or another — quotas and the free market are [deeply] interconnected. The first question is who will actually get quotas and on what conditions."

Overall exports of ferrous scrap from Russia dropped by 18pc to 934,500t in January–March, customs data show. Of this, some 373,800t, or around 40pc of the total, was shipped to Turkey, down by 26pc on the first quarter of last year. Belarus received 28pc and South Korea around 16pc of total exports.