Page 150 - RusRPTApr21

9.1.11 Metallurgy & mining sector news
Russian export steel prices. The HRC price jumped 7% w-o-w to $810- 815/tonne FOB Black Sea, the highest since August 2008, while the slab price grew 5% w-o-w to $720-725/tonne.
After a brief decline in February, over the past five weeks the Russian export HRC price has grown 16%. However, the domestic HRC price has grown just 3% over the same period to around $730/tonne EXW, meaning that there is around a $50-55/tonne domestic discount to the export netback at spot prices, versus the average historical $50/tonne premium.
Of note, export longs prices generally remain below flats, with billet FOB Black Sea at the $573/tonne mark and rebar at $635-640/tonne (the latter price is estimated once a month, with the latest one as of March 1).
Russian flat steel prices are well supported by continuing flats price growth in the EU market due to strong steel demand, restocking across the steel supply chain and supply shortages as production has been slow to catch up with demand. The import price of CIF Antwerp has grown 10% since mid-February to $893/tonne, while the domestic Northern European HRC EXW price reached $943/tonne this week, the highest since September 2008.
In China, the domestic HRC price remains around $675/tonne ex-VAT, up 7% since the end of the Chinese New Year. China's target this year for the issuance of special local governments bonds for financing infrastructure projects was decreased by just 2.3% y-o-y to CNY3,650 bln and is still 70% above the 2019 level. This shows that the rollback of infrastructure spending in China should be relatively slow.
According to RBC, the Russian government has proposed providing a tax deduction from 2022 to those metals and mining companies for which the MET rate was increased 3.5 times from the beginning of 2021. RBC also noted that the deduction would be linked to a company’s development capex, but its size would not exceed 50% of the difference between the MET for 2022 and the maximum annual MET for 2019-21. No decision has been taken yet and the timing for considering this project is also unclear. The Russian government had increased the MET rate for base metals and iron ore 3.5x from 2021. The most positive effect from the MET deduction in 2022 might be for Norilsk Nickel, as the MET increase for 2021 hits it the most (USD 509mn of additional taxes, or some 6% of 2021F EBITDA) and the company has launched its capex programme (we estimate the company’s 2022F capex at USD3bn, or up 70% on the 2020 level). However, at this stage, the exact amount of the MET deduction is unclear. Hence, we treat the news as neutral, pending further details.
150 RUSSIA Country Report April 2021 www.intellinews.com