Russia May Restrict Ferrous Scrap Exports with Quotas from July

As per updates received from industry sources, Russia's government intends to implement a system of differentiated regional quotas for ferrous scrap exports from the beginning of July for the six months in H2-CY19. According to an estimate, the quotas will be set at an average of 60-70% of historic export volumes for ferrous scrap from Russia's Fareast, Northwest, Central European and Southern regions.

The government has yet to officially confirm the implementation, but the quota volumes allocated are expected to be defined by June 25 and export contracts will be awarded through auctions for scrap trade in corresponding to a region's export volumes adjusted to its scrap status in terms of shortage or surplus over 2016-18.

In Dec'18, a group of Russia's steel pipe makers had presented a proposal for the implementation of a temporary ferrous scrap export ban to the country's economy ministry. However, this possibility had prolonged till the beginning of the June month with broad opposition shown by many of the Russian scrap companies and market participants.

What could be its impact on the market?

Amurstal, being the only steelmaker in Russia's Far East region and totally scrap-fed dependent company likely to be one of the main beneficiaries of export restrictions with improved domestic scrap supply. The company has been facing troubles with insufficient domestic scrap supply since the past couple of years.

As per reports, under the new quota system, Russia's scrap exports may drop around 20% to roughly 4 MnT per annum, with the far east and southern regions' export potential being the most affected. However, it is being anticipated that this may distress all exporters with the clarity of its impact and exact differentiation of quotas is still awaited.

In 2018, the government had imposed a 6-month ban on scrap exports from Far East ports in the country however it had a very minor effect on total export volume as suppliers continued to find exports more attractive, despite the restrictions. As per recent customs data maintained with SteelMint, the country exported 5,180,305 MT ferrous scrap in CY18 against 4,977,053 MT ferrous scrap recorded during CY17 observing a marginal rise by 4% Y-o-Y.

Russian scrap exports down 25% in Jan-Apr'19 - The country showed a 25% drop in total scrap exports during Jan-Apr'19 to 1.15 MnT as against 1.53 MnT recorded in Jan-Apr'18. Turkey remained the largest importer of Russian scrap occupying almost half share. Turkey imported 0.58 MnT (down 28% Y-o-Y) followed by South Korea at 0.23 MnT (down 8% Y-o-Y) and Belarus at 0.15 MnT (down 46% Y-o-Y) occupying 20% and 15% share over the same period last year.