Russia pig iron export tariff may open new markets for India

Close on the heels of the 15% steel export tax announced in Jun'21 from Aug-Dec'21, Russia has now brought about another export tariff change, this time in pig iron.

The country has halved the export tariff on pig iron by just over half to $54/tonne (t) but where the 15% steel export tax also applies since pig iron has been reclassified as a steel-making raw material.

As per news, Russia's pig iron exports would have been subjected to a $115/t or 15% - whichever is higher- export tariff. However, the Russian government has now reduced the $115/t rate to $54/t, but he has left the 15% tax floor unchanged. For this reason, market sources feel the actual tariff will be lower by only $25-$30/t and not by $61/t.

For instance, with the current FoB Black Sea pig iron price at $580/t, the 15% rate of $87/t will be applicable, being higher, to Russia's pig iron exports and not the $54/t as the tariff revision seems to suggest.

The Black Sea FoB pig iron price needs to plunge to $350/t for the $54/t rate to be applied instead of 15%, which is highly unlikely, feel marketmen.

It seems the Russian government has initiated this move on the request of a major pig iron exporter, Industrial Metallurgical Holding (aka Tulachermet).

The tariffs will apply to direct reduced iron and hot briquetted iron (alternative steel-making raw materials).

Russia's pig iron exports

Russia's pig iron exports in the first six months of CY'21 (Jan-Jun'21) were at 1.32 million tonnes (mn t) compared to 1.74 mn t seen in the same period in CY'20, a decline of 24%.

The main importing countries were the US (0.42 mn t), Turkey (0.28 mn t), China (0.25 mn t) and Italy (0.19 mn t).

India impact

India, on the other hand, exported 0.41 mn t of pig iron in H1 CY'21 compared to 0.44 mn t in Jan-Jun'21, down 7% on the year.

However, even the reduced export tariff means some extra financial burden on Russian pig iron exporters which would likely make them less active in the seaborne market.

A pig iron exporter from India said it is good news for the Indian players. "New markets of Turkey and Europe, which are being supplied by Russia at present, will open up," said the official.

On the other hand, another source said the 54/t rate will hardly apply at the present Black Sea FoB price levels since the 15% steel export tax will be higher.

"So the 15% export duty will prevail. However, it will benefit India if China's demand is there," the source added.