The Ministry of Finance has prepared a draft law "On Amending the Second Part of the Tax Code", which envisages a mechanism to change tax policy, especially for metallurgists and fertilizer producers. In addition to the increase in BAT and income tax for metallurgical and fertilizer producers, an excise tax will be introduced to steel producers. A source from the government explained that a final decision on changing the tax policy has not yet been made, and the issue has been discussed with the business community, including metallurgists.
In the new draft law, the Russian Ministry of Finance, in addition to adjusting the MET rates and differentiating the income tax, also envisaged an excise tax on steel. If it is over $300 per ton, it will be 3% of the export price of slab at Russian ports. While discussing the growth of the extraction tax, the idea of introducing an excise tax on liquid steel arose: not all metallurgists have mining projects, so the extraction tax does not solve the problem of withdrawing excess profits from Interfax's resources. explained the reasons for the emergence of the new tax in the discussion. According to an RBC source close to metallurgical companies, the enterprise, in discussions with the authorities, proposed to exclude the steel produced in electric furnaces from the excise duty due to its low profitability. However, the current version of the Ministry of Finance draft law does not provide for such exceptions.
The largest steel producers in Russia are Severstal, Evraz, NLMK Group, MMK and Mechel. The cost of slab in Black Sea ports is currently around $720-740 per ton. The share of electric steel in Russian ferrous metallurgy reaches 30%.
According to Sinara IB analyst Dmitry Smolin, in addition to all steelmakers, pipe producers may also be subject to the new tax: “The market did not expect this, because initially it was one of three options - either MET, or if profit tax is the third option, MET and income tax together”.
As expected for coking coal and iron ore producers, BAT will be fixed at world market prices for these raw materials. For coal miners, the rate will be 1.5%, and for ore producers - 5.5%. As Dmitry Smolin points out, if such a binding for iron ore seems sufficient, then it would be more correct to build a dependency on the domestic price of raw materials for coking coal, because the quality of coking coal is not in the world. It looks much lower than coal from Russia, Australia or the United States. So, although the MET ratio for coal doesn't seem aggressive - just 1.5%, the benchmark would still be worth revising, the analyst said. According to him, the tax will cost coal producers 3-4% of EBITDA next year.
Overall, for ferrous metallurgy companies, the expected impact from the increase in BAT and excise duties on steel could be around 6-8% of their projected EBITDA for 2022, according to Dmitry Smolin.
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