Russia

Russia’s 15% export duty on steel has not impacted market prices for flat-rolled products, either coming into the European Union or rolled within the 27-member bloc, market participants told MetalMiner.

“The Russian [steelmakers] are absorbing it completely,” one trading source said of the export duty.

A second trader noted a similar situation.

“The export tax has nothing to do with the customer here. That is the producers’ issue,” that source noted.

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

Russia export duty after two months

Russia exports

waldemarus/Adobe Stock

Their comments followed Russian Federal Government’s Decree No. 988 of June 25. The decree imposed a 15% export duty from Aug. 1 to Dec. 31 on all steel exports – finished and semi-finished – from the country and also the wider Eurasian Economic Union. That includes not only Russia, but also Armenia, Belarus, Kazakhstan and Kyrgyzstan. It also includes observer states Moldova, Cuba and Central Asian state Uzbekistan.

The duty also applies to certain base metals, including copper, nickel and low-grade aluminum products.

Federal government officials claimed then that sharply rising steel prices in Europe, Russia’s second-largest export market, were translating to higher steel prices at home.

The European Union is also Russia’s second-largest destination market for steel exports, including finished, semi-finished and tubular products. Those exports exceeded 4.02 million metric tons in 2019, the analyst said.

That number was down 20% on the year from 5.17 million metric tons, yet the bloc retained its place as Russia’s second-largest export market.

Read more

Russia’s plan to introduce from Aug. 1 a temporary export duty on metal exports has brought varied reactions from European industry watchers and market participants.

“It’s about showing the strength of the Russian metals industry,” one analyst told MetalMiner.

Russia’s planned tariff may also be a retaliatory measure against Europe and its proposed carbon tax on metals imports from high-carbon producers, of which Russia is one, the analyst added.

“It feels like it is a broadside shot,” the analyst said.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Russia export duty to cover steel, base metals

tariff

Feng Yu/Adobe Stock

The Russian Federal Government’s Decree No. 988 of June 25 stipulates a 15% export duty from Aug. 1 to Dec. 31 on all steel – semi-finished and finished – as well as on copper nickel, and low-grade aluminum leaving the country and the wider Eurasian Economic Union (EAEU).

Member states of the EAEU include Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. In addition, Cuba, Moldova and Uzbekistan are observer states.

One of the more likely beneficiaries in Europe from the duty is the steel sector, sources told MetalMiner.

“Everybody loves this,” one analyst said about Russia’s tentative export duty, as it could further push up already-high prices for steel products in Europe.

Domestically produced hot rolled coil for Q4 production within Western Europe is now €1,170-€1,200 ($1,390-1,420) per ton exw, traders said. That marks an increase from the €1,120-1,130 ($1,370-1,385) reported earlier in June.

Planned shutdowns of rolling equipment or banking of hot ends for maintenance over Europe’s summer months could also further push up prices in the face of high demand throughout Western Europe, the analyst stated.

One steel trader voiced a similar opinion.

“This is great for everybody” the trader noted, as the decree will push up steel prices on both the domestic and import markets.

“Who’s gonna wait until the end of the year to acquire steel if Russia is out of the market?” the trader rhetorically asked.

Ukraine’s Metinvest is likely to also benefit from this. The group is a major supplier of long products into the E.U. Resulting higher prices will also mean more revenue.

Read more

The metals markets received a jolt late last week with the news that Russia is considering applying export tariffs to steel, aluminium, copper, nickel and ferro alloys from this August through to at least the end of the year in order to ease metal supply and prices for domestic consumers.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Russia metals tariffs to cover copper, aluminum, nickel and others

tariff

Feng Yu/Adobe Stock

According to Bloomberg, the plans include a base duty rate across all products covered by the duties of 15%. However, it includes a specific minimum tariff for each metal, varying from $1,226 a ton for copper, $2,321 for nickel and $254 for primary aluminum. In addition, each steel grade would incur its own rate, starting with HRC at $115 per ton.

As Bloomberg states, the taxes could have far-reaching implications for global metals markets.

That is particularly true at a time of tight supply for products such as aluminum.

Rusal controls about 10% of the global aluminium sector. Meanwhile, Norilsk Nickel produces about 20% of the world’s nickel. Russia is the third-biggest steel exporter, with most sales going to Europe.

Just under 10% of the European market is serviced by primary aluminum imports from Russia. Europe is not alone, either. The U.S. and consumers in the Far East all receive primary aluminum supplies. Therefore, the tariff will have an impact on physical delivery premiums in the U.S., Europe and Japan.

Read more

Boasts of a deal between Saudi Arabia and Russia, leaders of the OPEC+ oil producers alliance, to lead cuts in output by 10 million to 15 million barrels per day may have boosted oil prices for the time being.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

But talk of a deal is already being called into question, as Russia firmly denies any such deal is in the offing — worse, saying no specific talks have even taken place.

Read more

The initial reaction to the collapse in oil prices this week, initiated by Saudi Arabia’s unilateral declaration that it would open the spigots and flood the market with oil while simultaneously heavily discounting prices, was followed by optimism in some quarters.

That optimism came with the thought that lower oil prices would aid economies struggling with supply chain and worker attendance challenges as a result of the novel coronavirus (Covid-19) pandemic.

Request a 30-minute demo of the MetalMiner Insights platform now.

Certainly, lower oil prices will help level balance of payments deficits run by some heavy oil consumers, like India and China. Even Europe, which is a net oil importer, will benefit to varying degrees.

But the size of the price fall will also prove a mixed blessing causing acute pain in other areas, not least among the major players themselves.

Read more

phonlamaiphoto/Adobe Stock

The current plunge in the oil price has less to do with the coronavirus than it does with power politics.

Oil prices crashed by the most in 29 years Sunday night, The Telegraph reported this morning, as Saudi Arabia announced its deal with OPEC+ to limit production was dead in the water. Instead, the kingdom was set to raise output and heavily discount prices.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

The resulting drop is the steepest collapse in oil prices since 1991 and takes the market back to levels last seen in early 2016. A barrel cost almost $70 just two months ago but hit $36 this morning and pushed West Texas Intermediate (WTI) down to $32.

Read more

In the short term, a new five-year gas transit agreement between Russia and Ukraine, agreed just 12 days before the current agreement is to expire, is good news for Europe, Russia and Ukraine — a rare example of pragmatism and compromise in today’s winner-takes-all approach to diplomacy.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

But in the longer term the agreement, heralding as it does a waning of the Russian-Ukrainian interdependency, removes an issue that demands a degree of cooperation and opens to the possibility that bilateral tensions could rise in the future.

Still, for now, as a Stratfor Worldview report observes, Europe will not have to worry about keeping the lights on or heating their homes this winter and nor will Ukraine (so economically dependent as it is on gas transit revenues).

The deal is the result of compromise on both sides.

As part of the deal, Russia will gradually reduce its use of Ukrainian pipeline infrastructure over the next five years as it expands its access to the European natural gas market through the Nord Stream 2 and TurkStream pipelines.

Ukraine, meanwhile, will use the next five years to continue its efforts to reduce its dependence on natural gas that comes directly from Russia by ramping up domestic gas production and searching for alternative routes for imports.

As gas volumes decrease through the Ukrainian system — decreasing from the current volume of 90 bcm to 65 bcm next year and just 40 bcm in 2021 — and the infrastructure continues to age, income would be expected to decrease and maintenance expenditure to rise. However, as part of the deal, Russia has agreed to fix transit fees over the next five years at a higher level to allow Ukraine to sustain its roughly $3 billion in revenue even though volumes will halve, Stratfor reports.

It will be interesting to see whether pragmatism and compromise can prevail over the completion of the new Nord Stream 2 and TurkStream pipelines — not between Europe and Russia but between Europe and the U.S.

According to Reuters, President Donald Trump signed a bill late this month imposing sanctions on the Nord Stream 2 gas pipeline project led by Gazprom, Russia’s state-controlled gas company. The project aims to send gas under the Baltic Sea, bypassing Ukraine and doubling the capacity of the existing line.

Source: Stratfor

The threat of sanctions blocking access to the U.S. financial system forced Allseas, a Swiss-Dutch company that lays deep-sea pipe, to suspend work on the project. All but a 100-mile (160-kilometer) stretch remains to be completed, the article states.

Most European countries are furious at the U.S. action, seeing it as interference in an internal European project. The U.S. has been against Europe’s greater reliance on Russian gas since the Obama administration on the grounds it strengthens Putin’s economic and political grip on Europe. Europe suspects the U.S. simply wants to substitute cheap Russian gas for more expensive U.S. liquefied natural gas (LNG) shale gas exports, arguing that if the U.S. were really concerned about Russian influence over Europe, the president would be a stronger advocate of mutual defense and, in particular, NATO.

For now, work toward completion of the last 130 kilometers of the Nord Stream 2 pipeline has been stopped by the sanctions threats, but Russian state media reported Gazprom’s pipe-laying vessel Akademik Cherskiy, currently in the far east, would be brought to the Baltic to complete the pipeline regardless.

Europe’s desire to see dialogue and cooperation with Russia, as opposed to distrust and detachment, may yet prove naive.

Europe relies on Russia for something like half its natural gas supplies and Russia has shown it is not above restricting supplies to achieve its political ends, as happened in 2014 after the Russian annexation of Crimea and Moscow’s attempts to pressure Ukraine — and, hence, Europe — by cutting off gas supplies.

Some European countries agree with the U.S. that diversification, whether to the U.S. or elsewhere, would make more sense, however convenient and cheap Russian gas is. Over-reliance is clearly a risk, however strongly many on the other side argue Russia needs the revenues even more than Europe needs the gas.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Mark it down as yet another item on the world’s agenda to be resolved in 2020 requiring compromise and pragmatism all round.

Pavel Ignatov/Adobe Stock

This morning in metals news, U.S. steel mills’ capacity utilization rate inched up this past week, India’s steel sector looks to the government for protection from diverted steel, and the Office of the United States Representative (USTR) released its annual report on the WTO compliance of China and Russia.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

Steel Utilization Rate Hits 80.5%

Steel mills in the U.S. have operated at a capacity utilization rate of 80.5% through Feb. 2, according to this week’s report by the American Iron and Steel Institute (AISI).

Adjusted year-to-date production reached 8.95 million tons. Meanwhile, for the same period in 2017, steel mills produced 8.12 million tons at a 73.8% capacity utilization rate.

India’s Steel Sector Leery of Diverted Steel

According to a Reuters report, the Indian steel sector is looking for assistance from the Indian government via import duties to ward off diverted steel supplies.

Recently, the E.U.’s member states voted to impose new steel safeguards that will remain in place as late as July 2021. The move came as European producers worried steel supplies that would have been destined for the U.S. would be diverted elsewhere following the Trump administration’s Section 232 tariffs on steel and aluminum.

As for India, according to the Reuters report, Indian steelmakers have complained to the government that China, Japan, South Korea and Vietnam are allegedly dumping cheap steel in India, eating into domestic producers’ market share.

USTR Release Report on China, WTO Compliance

Pursuant to the U.S.-China Relations Act of 2000 — by which the USTR must present an annual report to Congress on China’s compliance with WTO rules and regulations — the USTR released its 17th report vis-a-vis China.

“The United States’ approach to China is more aggressive than in the past,” the report’s executive summary states. “Out of necessity, the United States is now using all available tools – including domestic trade remedies, bilateral negotiations, WTO litigation and strategic engagement with like-minded trading partners – to respond to the unique and very serious challenges presented by China. But the goal for the United States remains the same. The United States seeks a trade relationship with China that is fair, reciprocal and balanced.”

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

The full report is available here.

alexkich/Adobe Stock

A resolution that sought to reverse the Trump administration’s decision to ease sanctions on Russian companies — including aluminum heavyweight United Company Rusalfailed to pass this week, coming in at a 57-42 vote (just short of the 60 votes needed to pass).

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

Sen. Chuck Schumer (D-NY) introduced the resolution Jan. 4, after which it was referred to the Committee on Banking, Housing, and Urban Affairs.

The resolution states that Congress “disapproves of the action relating to the application of sanctions imposed with respect to the Russian Federation proposed by the President in the report submitted to Congress under section 216(a)(1) of the Russia Sanctions Review Act of 2017 on December 19, 2018, relating to terminating sanctions imposed on En+ Group plc (“En+”), UC Rusal plc (“Rusal”), and JSC EuroSibEnergo (“ESE”).”

In April 2018, the U.S. Treasury Department announced sanctions against several Russian companies and their owners, including Russian oligarch Oleg Deripaska and Rusal (the second-largest aluminum producer in the world).

The April announcement sent aluminum prices skyrocketing on fears of Rusal aluminum being taken off the market.

2018 LME prices. Source: LME

As has been noted here previously, the Treasury proceeded to delay its deadline for U.S. companies to unwind business relations with the listed Russian firms, first from Oct. 23 to Nov. 12, to Dec.12, then Jan. 7, then Jan. 21.

However, on Dec. 19, 2019, the Treasury announced intentions to delist En+ Group (which has a controlling interest in Rusal), Rusal, and EuroSibEnergo.

“Treasury sanctioned these companies because of their ownership and control by sanctioned Russian oligarch Oleg Deripaska, not for the conduct of the companies themselves. These companies have committed to significantly diminish Deripaska’s ownership and sever his control.  The companies will be subject to ongoing compliance and will face severe consequences if they fail to comply,” Treasury Secretary Steven Mnuchin said in a release at the time. “OFAC maintains the ability under the terms of the agreement to have unprecedented levels of transparency into operations.”

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

Notably, although the resolution ultimately did not receive the requisite votes to pass, 11 Senate Republicans voted in favor of the resolution to reverse the decision to ease sanctions — representing a now rare instance of bipartisanship.

phonlamaiphoto/Adobe Stock

Brent crude has hit a new low for 2018, with the international benchmark down 3% last week to its lowest level in 13 months.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

West Texas Intermediate, the main U.S. contract, fell 4.5% to $52.09. Investors have taken fright in a relatively short space of time that the market is looking increasingly oversupplied.

Hedge fund long positions are being exited at pace and the smart money that had shorted the market are looking at gains of 16% since October, according to the Financial Times.

Such success stories though are in the minority, as many funds have got their fingers burned at the rapid reversal in oil’s fortunes.

Read more

1 2 3 8