As market participants assess Russia's plan to impose export duties on various ferrous and non-ferrous products exported outside of the Eurasian Economic Union (EAEU), nickel and aluminum prices have risen sharply this morning, with some ferro-alloy traders scrambling to get Russian material trucked across the border before the duties are implemented.

Russian Ministry of Industry and Trade proposed duties that would be in effect from 1 August to 31 December 2021 to protect the domestic market, according to a report published on Wednesday. Revenue from duties will be used to offset rising metal prices in Russia's domestic market, according to the ministry. First Deputy Prime Minister Andrei Belousov stated that Russia's economy is not prepared for an avalanche-like shock transfer of global metal prices to the domestic market, as happened in 2008.

Its recommendations cover a wide range of products including steel and ferroalloys, as well as other elements such as copper, nickel and aluminium seamless. The base tax rate would be 15 percent, with specific duties levied on each product — at least $150 per tonne for ferro-alloys, at least $1,226 per tonne for copper, at least $2,321 per tonne for nickel, and at least $254 per tonne for aluminum.

Aluminum premiums will be adjusted.
Due to the fact that Russia is a major supplier of primary aluminum to net-importing regions, the impact on global aluminum premiums is also likely to be significant.

It is estimated that the EU sourced 9.31pc of its unwrought aluminium tube imports from Russia in 2017, according to national imports statistics. However, this figure has been lowered in recent years, owing to the economic impact of Covid-19 and the attractiveness of prices in Asia, both of which have increased Russian imports in recent years.

According to an analyst, because Rusal is only a marginal supplier to many net-importing regions and countries, global premiums will have to be increased by the same amount. Because Russian metal is granted that status in the EU, imports of Russian aluminum into Europe account for a significant portion of the region's duty-free aluminum market. As a result, the gap between duty-unpaid premiums and duty-paid premiums is expected to narrow further. The gap between the two premiums is currently 3 percent of the LME aluminium price in line with the duties, but it has narrowed as the duty-unpaid market has tightened this year, partly as a result of more Russian metal making its way to Asia and other regions outside Europe.

Argus estimates that duty-unpaid aluminum premiums in Europe are worth $205-215/t, while duty-paid premiums are worth $250-260/t, according to the company. At the current LME aluminum price, the duty would be slightly more than $70 per tonne.