Russia to suspend anti-dumping duty for Interpipe wheels

The Eurasian Economic Commission (EEC) will
temporarily suspend the 34.22% anti-dumping duty on imports of Ukrainian railcar
wheels into the Eurasian Economic Union (EAEU) until June 1, 2020, according to
the EEC’s July 23 announcement. The suspension will come into effect 30 days
after the decision’s publication.

An EEC report dated June 17 concluded that the duty’s
damage to wheel buyers outweighs the potential negative effects of wheel
imports from Ukraine on EAEU wheel producers.

The EEC is the executive body of the Eurasian Economic
Union (EAEU) led by Russia and uniting five former Soviet countries, including
Belarus, Kazakhstan, Armenia and Kyrgyzstan.

Recall, the EEC hiked the duty
on Ukrainian railcar wheels to 34.22% from 4.75% in January 2018. Ukraine’s
sole producer of steel wheels is Interpipe NTRP, a part of Interpipe (INPIP),
the largest Ukrainian producer of steel pipes.

Dmytro Khoroshun: The
suspension is a major positive for Interpipe, whose wheel sales to the EAEU in
2018 amounted to about 75 kt, or 40% of its total wheel sales. We estimate that
Interpipe might gain at least USD 28-46 mln in EBITDA a year due to the duty
suspension if it keeps the annual EAEU sales volume at 75 kt, and even more if
it hikes its sales volumes. Such a gain will amount to 23-38% of the USD 120
mln mentioned in the media as the company’s 2017 EBITDA.

In 5M19, Ukraine’s railcar wheel exports into the EAEU
amounted to 39.5 kt, a 21% yoy gain, according to our analysis of the Ukrstat
data. During this period, the average price was USD 1,790/t, a 67% yoy jump.
Such a huge yoy price jump reflects the acute current wheel deficit in the
EAEU, mostly in Russia.

Nevertheless, we do not expect the duty suspension
to last beyond 2020 because various market commentators say the current railcar
wheel deficit in Russia is a short-term phenomenon. Therefore, Interpipe should
try and boost its sales to Russia while the duty is suspended.