Kazakh scrap does not show up for reception
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Kazakhstan has banned the export of scrap outside the country by rail. This will hit Russian electrometallurgical enterprises that process scrap into rolled construction products. The shortage of scrap on the domestic Russian market may increase to 500 thousand tons. Kazakhstan itself, by introducing bans, is trying to reduce domestic prices for scrap, which local metallurgists are interested in consuming.
The Association of Electrometallurgical Enterprises (AEMP) appealed to the Ministry of Industry and Trade, the Ministry of Economy and the EEC with a request to influence the position of Kazakhstan, which for six months introduced a ban on the export of scrap ferrous metals by rail.
Bans on the export of scrap from Kazakhstan in one form or another were in effect from 2014 to 2018. However, at that time they did not concern Russia, but only supplies to the markets of third countries, since Russia and Kazakhstan have a single customs space. However, Astana sometimes resorts to directives to its railways that prohibit the shipment of certain goods to border stations.
The total average volume of scrap collection before the bans was introduced was at the level of 3.5 million tons per year, of which about 1.7 million tons were domestic consumption, and the rest was loaded for export. Until 2014, the main consumer of Kazakh scrap was China; about 10–15% of the volume of Kazakh scrap exports was shipped to Russia. After the introduction of export bans in 2014, first by road and then by rail to third countries, the share of scrap exports to Russia began to grow. At its peak, supplies to Russia reached 1 million tons.
Chairman of the Kazakh association “Republican Union of Industrialists of Secondary Metallurgy” Vladimir Dvoretsky says that the point of introducing the ban is to reduce prices on the domestic market. “When a country goes into lockdown, scrap prices drop by 20% to 40%. This is lobbying on the part of metallurgical companies, in particular ArcelorMittal,” he told Kommersant. If we sum up the negative economic effect on scrap collection over the entire period of the ban, it is about 800 billion tenge (160 billion rubles), and the lion’s share of this money is the losses of self-employed citizens who directly collect scrap, comments Vladimir Dvoretsky.
Russia also restricts the export of scrap, but only to countries outside the EAEU. There is an export quota of 600 thousand tons until July 2024. When exporting scrap and ferrous metal waste within the quota, the duty will be 5%, but not less than €15 per ton, over the quota – 5%, but not less than €290 per ton. Restrictions on the export of scrap were introduced to meet the needs of Russian metallurgists.
Electrometallurgists do not have their own raw material base and produce steel products by processing scrap, which they purchase on the market. The availability of scrap ensures the efficiency of enterprises. The ban by Kazakhstan will lead to the fact that Russian companies will not receive 500 thousand tons of scrap. A decrease in the supply of strategic raw materials will inevitably lead to price fluctuations for finished electrometallurgical products, including construction steel, the association believes. AEMP is counting on dialogue with the authorities of Kazakhstan to eliminate current restrictions. The relevant Russian ministries, the EEC, and Russian Steel did not provide comments.
The raw material situation for electrometallurgists is deteriorating. Electrometallurgists in the south of the country report an increasing shortage due to restrictions on its supply. The DPR authorities have banned the transit of scrap through their territory to support local production, which blocks the only route for the supply of scrap from Crimea by road (see Kommersant on February 19).
The share of scrap in the cost of producing a ton of steel in electric arc furnaces, including variable and fixed costs, ranges from 70%. Therefore, stopping the supply of scrap creates risks of increasing prices for construction steel, says Boris Krasnozhenov from Alfa Bank.
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