Hot support: metallurgists are preparing to ease the tax burden

The authorities are considering the possibility of easing the tax burden for steel companies. According to Izvestia, if a decision is made when calculating and paying the excise tax on liquid steel, iron reduction products (for example, cast iron) may be equated to ferrous scrap. The innovation will potentially reduce the payments of companies to the budget by 30-40 billion per year, experts say. Such a measure can become a significant support for enterprises facing sanctions pressure and export restrictions.

What kind of support is being prepared for metallurgists

The authorities are preparing to ease the tax burden for metallurgists, Izvestia found out. When calculating and paying excise duty on liquid steel, iron recovery products (sponge iron, cast iron, and others) used in production as raw materials may be equated to ferrous scrap, which will eventually affect the amount of tax payments. Deputy Prime Minister Denis Manturov instructed to work out the innovation, it follows from the minutes of the meeting with the official dated May 21, which was reviewed by Izvestia. The discussion of this issue is still ongoing, the editorial source said.

Currently, enterprises that produce steel in electric furnaces and use at least 80% of scrap as raw materials are exempt from excise duty. The Government's proposal is to allow not only scrap to be included in this 80% quota, but also products of direct iron reduction (for example, cast iron or sponge iron).

The excise tax was introduced on January 1, 2022, replacing the export duties in force until the end of 2021. The rate is 2.7% of the average monthly export price of a slab in the seaports of the south of the Russian Federation. According to the formula for calculating the excise tax for vertically integrated steel producers, it is reset if the export price of a slab per calendar month multiplied by the average value of the US dollar against the ruble is less than 30 thousand rubles per ton.

— The initiative can be regarded as serious government support for non-integrated electrical metallurgists. The calculation of the excise tax rate on steel takes into account the features associated with the market value of raw materials (steel scrap) and additional costs associated with the properties of the steel produced and its chemical composition. As a result, metallurgical enterprises that can use their own cast iron in electric furnaces are able to produce more cost—effectively than "independent" plants that purchase scrap metal, and its price shows steady upward dynamics," said Dmitry Tortev, a member of the expert council of the State Duma Committee for the Protection of Competition.

We can talk about reducing the fiscal burden from factories by 30-40 billion rubles a year out of about 200 billion that are paid by excise tax, the expert added.

"The support measure seems logical in the context of sanctions pressure on Russian business, difficulties with access to equipment and sales markets," the specialist said.

Izvestia sent inquiries to the Ministry of Industry and Trade, the Ministry of Finance, as well as to metallurgical companies.

What factors influence the state of the industry

Since the beginning of Russia's special military operation in Ukraine, Western politicians have chosen Russian metallurgy as one of the main areas of sanctions pressure. As early as March 2022, the EU imposed sanctions on Russian steelmakers, restricting the import of certain types of steel products. Russian President Vladimir Putin called the restrictions on the work of domestic metallurgists a blatant manifestation of unfair competition, as in other industries. These are "attempts by Western countries to restrain Russian business as one of the leaders of the global metallurgy industry and to redo markets, of course, in their favor," the head of state noted.

—Steps to optimize the excise tax, if taken promptly, will slightly ease the financial burden on the industry and open a window of opportunity for the implementation of investment and management projects in the regions of Russia," said economist Andrei Loboda.

However, according to the expert, this is unlikely to be a panacea, metallurgists need open sales markets, competitive prices and balanced logistics costs.

— Metallurgical production in Russia shows a decrease of 10.2% year on year. This is due to the high key interest rate, which significantly limited the implementation of new projects, the ruble-dollar exchange rate, which has recovered by almost 40% since the beginning of the year, and, as a result, a noticeable drop in export earnings, lower prices on the domestic market, and low demand from China. Positive changes in these factors would allow the industry to feel much more confident and develop dynamically," added Andrei Loboda.

As Izvestia wrote, excessive volatility of the Russian currency was called one of the strategic risks of fulfilling the country's national goals. The Ministry of Economic Development called the undesirable rate below 75 and above 110 rubles, the average risk is below 85 and above 100 rubles. According to experts, the combination of a strong ruble and fairly low world prices for most commodities reduces budget revenues. In addition, from October 2024 to June 2025, the Bank of Russia kept the rate at a record high of 21% per annum. In early summer, he began to ease monetary policy and lowered the key one for the first time in three years. At the last meeting on July 25, the regulator lowered the rate immediately by 2 percentage points to 18%.

Targeted support measures in the form of changes in approaches to taxation are a common global practice and seem to be a justified measure in the current situation, said Georgy Ostapkovich, Research Director at the HSE Center for Market Research. According to him, metallurgy is a multiplicative industry, and its sustainable development will ensure the growth of many sectors of the economy. However, the innovation will reduce budget revenues, so it should be temporary, the specialist concluded.