Potential Impact of Russian Metal Export Tariffs

Russia's efforts to build monetary reserves on the backs of metals producers could reduce global supply in an already tight market.

"The income from the duties will be used 'to compensate' for rising metal prices in Russia's domestic market, [Russia's ministry of industry] Andrey Belousov said." Argus Media, June 25, 2021

Summary: '"Russian exports of aluminium and aluminium products, copper wire and wire rod averaged 80-85pc of annual production in 2015-20," the ministry [of industry] said. "Customs data for 2019-20 and the first quarter of 2021 showed no exports of refined copper alloys, or copper billets for wire production."' (Please see Argus, June 2, for more info.) The base tax rate would stand at 15pc, with each product then incurring a specific duty — at least $150/t for ferro-alloys, at least $1,226/t for copper, $2,321/t for nickel and $254/t for aluminium. According to the Reuters, [First deputy prime minister Andrey Belousov] said he believed the size of metals exports from Russia would remain unaffected by the tax. According to Argus, the Russian state had already implemented tariffs on ferrous scrap exports in January 2021. At that time, Argus believed that the tariffs would have little impact on exports.

AEGIS Thoughts: Russian exporters have benefited from the price and export boom in 2020 and 2021; thus, both the tariffs in late January 2021 and those which are to be implemented in the coming days have been brushed off by industry insiders. However, any pullback in demand or margins could slam the door shut on exports, and have a knock-on effect for the export-dependent state currency, the ruble. Already one of the weakest currencies in the developed world, the Russian ruble could further erode from a drop in exports and/or prices of either oil or metals.