As Kommersant found out, the government is going to introduce export duties on almost all goods not yet subject to them, except for mechanical engineering products. The ad valorem rate will be tied to the ruble exchange rate and will be a maximum of 7% at an exchange rate above 95 rubles. for a dollar. The measure could come into effect as early as this year and will remain in effect until the end of 2024. The hardest hit will be metallurgists, coal miners and fertilizer producers, from whom, according to experts, the introduction of duties will take up to a third of their export margin. In such conditions, “no one will ever invest,” Kommersant’s sources among exporters say.
According to Kommersant, the Ministry of Finance and the Ministry of Economy are considering the possibility of introducing export duties on almost all types of goods from October 1 until the end of 2024, except for those for which there are either no payments or their size does not take into account changes in the ruble exchange rate. Thus, duties will not affect oil, petroleum products, gas, timber, scrap and grain. Also, mechanical engineering products under HS codes 84–96 (machinery and equipment, various aircraft, optical instruments, weapons and ammunition) will be removed from them.
The amount of the duty depends on the dollar exchange rate. At a rate of 80–85 rubles. it will be 4%, 85-90 rubles - 4.5%, 90-95 rubles - 5.5%, above 95 rubles - 7%.
The duties will affect the largest items of Russian non-oil and gas raw material exports: metals, coal and fertilizers.
According to Kommersant's sources, a number of ministries have been instructed to submit proposals to the Ministry of Finance and the Ministry of Economy to provide exceptions for goods that are highly dependent on imports (more than 50% of costs). “What is most confusing is the obvious financial unpredictability of the measure for business. In such conditions, no one will ever invest,” notes a Kommersant source among exporters.
The mechanism for withdrawing excess income, in this case devaluation, is a long-used government practice. However, in this case, the main reason for introducing duties is not the intention to replenish the budget, which is in good condition against the background of the weakening ruble, but the government’s attempt to reduce the inflationary impulse in the economy by reducing domestic prices for exported goods.
For ferrous and non-ferrous metals, duties are 15% were used in 2021 from August to December amid high export prices. According to the authors, the duties were supposed to restrain prices on the domestic market. In addition, they brought the budget an additional 45 billion rubles.
The idea of export duties on coal was discussed in 2022. Then it was assumed that they would start working from the beginning of 2023, but in the end the government limited itself to only a temporary increase in the mineral extraction tax. Now, when supplying thermal coal to the east, the exporters’ margin is estimated at 15–20%, says independent industrial expert Maxim Shaposhnikov.
For supplies to the south and northwest, the introduction of duties can make exports unprofitable.
He also notes that if duties are introduced, coal miners may face difficulties with debt servicing, which has become more expensive after the recent increase in rates by the Central Bank.
As for ferrous metals, according to Maxim Shaposhnikov, the current margin of rolled metal exports based on EBITDA is at the level of 10–15%. The introduction of a duty may reduce exports and foreign exchange flows into the country. Investment strategist of Arikapital Management Company Sergei Suverov notes that steel production in Russia is approximately 75 million tons per year, consumption is about 45 million tons, that is, about 30 million tons need to be exported. At the same time, in 2023, dollar export prices decreased: for slab - by 18% since the beginning of the year, for hot-rolled coil - by 9%.
On the other hand, Sergei Suverov clarifies that linking the export duty to the exchange rate will compensate for some of the negative effects due to lower costs in dollar terms with a weak ruble. However, in general, an increase in the fiscal burden may have a negative impact on companies' investment programs.
Mineral fertilizers are already subject to duties from the beginning of 2023. Before September 1, the rate was 23.5% of the difference between the market price and the cut-off point of $450 per ton, and if quotes were below this level, the duty was reset to zero. Through this measure, the government expected to receive 119 billion rubles. in a year. But against the backdrop of falling prices for fertilizers on world markets, the budget received only 6 billion rubles in the first half of the year. In connection with this, from September 1, the state changed the procedure for calculating the duty, establishing a fixed rate of 7% (although the Ministry of Finance’s bill initially assumed 8%) until the end of 2024. In addition to the ad valorem rate, minimum fixed duty rates are established depending on the type of fertilizer - 1.1 thousand rubles. per ton for nitrogen, 1.8 thousand rubles. for potash and 2.1 thousand rubles. for phosphorus and complex. Water-soluble phosphorus-containing fertilizers with a high cost - diammonium hydrogen phosphate and ammonium dihydrogen phosphate - were excluded from the duty.
Kommersant's sources in the chemical market say that the second quarter was quite difficult for manufacturers amid low prices. Now they have begun to gradually recover.
Thus, urea on the FOB Baltic Sea by mid-September had risen in price by about a third, to $350–400 per ton. But how long-term this trend will be is unknown, the interlocutors note, while the duty will be in effect for more than a year and then can be extended, as happened with fertilizer export quotas.
According to Agroexport, more than 50% of food supplies from Russia abroad are grains and oil and fat products, where duties are already in effect, the rest is the export of fish and seafood, meat and dairy products. The head of the National Meat Association, Sergei Yushin, says that domestic demand for poultry and pork is saturated, and industry participants continue to invest with an eye on foreign markets. Any measures to restrict exports in such conditions, he emphasizes, “deprive business of incentives.”