Rada hikes steel scrap export duty to EUR 180/t
Ukraine’s parliament on Dec. 2 approved an increase of export duty for steel scrap to EUR 180/t from EUR 58/t.
The duty will in force until September 2026, although its value might be adjusted again in the future.
Dmytro Khoroshun: The duty hike will be a major positive for Interpipe (INTHOL), which might save up to USD 100 mln per year in pre-tax costs (37% of its 2020 EBITDA) as a result.
We assume that Interpipe consumes about 1 mmt of steel scrap per year and that the duty hike will decrease Ukraine’s domestic steel scrap price by USD 100/t, or less than the EUR 122/t (USD 138/t) increase in the duty.
The pre-tax cost savings for Metinvest (METINV) will amount to up to USD 140 mln per year, or 6% of its 2020 EBITDA (including joint ventures). Metinvest’s total (including purchased and sourced internally) scrap consumption is about 19-23% of its crude steel production, we estimate from its prospectus data. We further assume that the company will produce about 11 mmt of crude steel per year (including at Dniprovskyy Coke) and that it purchases 130 kg of steel scrap per 1 t of crude steel produced.
The duty hike is timely, as scrap exports skyrocketed 16x to 503 kt in 10M21, according to Concorde Capital analysis of Ukrstat and State Customs Service data (10M20: 32 kt). About 437 kt, or 87% of the total, were exported to Turkey in 10M21 (10M20: 28 kt, or 88% of the total).
The 10M21 average price for scrap exported from Ukraine to Turkey was USD 376/t, 82% of Turkey CFR price average for the period as reported by Kallanish Commodities, a commodity market intelligence media organization, on Bloomberg, and 66% more yoy (10M20: USD 226/t, 84% of Turkey CFR price).
Ukraine’s domestic scrap price average for 10M21 was USD 293/t according to Metal Expert, a local consultancy, USD 83/t lower than the price for exports to Turkey and 80% higher yoy (10M20: USD 163/t, USD 63/t lower than the price for exports to Turkey). The EUR 58/t duty for exports from Ukraine was in effect from early 2019.