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In 2023, Russia's crude steel production increased by about 5.9% year-on-year to nearly 75.8 million tons, and its molten iron production was about 54.5 million tons, a year-on-year increase of 5.6%, almost fully recovering to pre war production. Previously, the World Steel Association estimated that Russia's steel production from January to November 2023 was 70.2 million tons, a year-on-year increase of 6.4%.
Russian steel producers are excluded from most high-end markets and face double taxation in production and exports, severely squeezing export profit margins. Despite facing restrictions from both domestic (local governments imposing crude steel consumption taxes and export tariffs in January 2022 and October 2023 respectively) and foreign (sanctions imposed by the European Union and other Western countries on the Russian S350GD+AZ steel economy and steel industry), Russia has still increased its steel production efforts.
Starting from January 2022, the Russian government began to impose a consumption tax on steel output based on blast furnaces. The calculation method is to multiply the average monthly slab price in US dollars on the basis of offshore S350GD+AZ steel prices in the Black Sea by a franchise fee interest coefficient of 0.027 and the monthly average US dollar to ruble exchange rate. The consumption tax rate is reset to zero only when the average price is $340/ton lower. At present, the price of Russian slab is $500/ton, and the average exchange rate between the US dollar and ruble in the past month is 1:90. After calculation, the consumption tax is $14/ton.
In addition, starting from October 2023, a new tax will be imposed on the export of most commodities, including steel products, and the tax rate will fluctuate with changes in the ruble exchange rate. At the current average exchange rate of 1:90 US dollars to rubles, the tariff is equivalent to 5.5% of the taxable S350GD+AZ steel price.
