Ukraine Extends Steel Scrap Export Duty for 5 Years
Ukrainian President Mr Volodymyr Zelensky signed the law, already approved by Ukraine's parliament, on 15 May extending the duty on the export of
Ukrainian President Mr Volodymyr Zelensky signed the law, already approved by Ukraine's parliament, on 15 May extending the duty on the export of ferrous scrap for the next five years, effective from May 15, 2021, to September 15, 2026. This extends the period of validity of the export duty rate of EUR 58 per tonne for waste and scrap of ferrous metals for five years. An extension of the duty at the current price was submitted in early March, following discussions at the beginning of this year and a request from Ukrainian steelmakers in mid-February. The parliament's committee on environmental policy and management endorsed the extension proposal in early April. Such conditions have been created to prevent a shortage of ferrous scrap in Ukraine, which will contribute to the smooth operation of the domestic metallurgical industry, preserving jobs and increasing tax revenues to budgets of all levels. In addition, the extension of the duty is expected to reduce greenhouse gas emissions, which is in line with Ukraine's intentions to join the European Green Deal.
Ukraine's scrap export duty was a point of contention when the country was working towards joining the World Trade Organisation, which it finally did at the beginning of 2008. The EU refused to endorse Ukraine's WTO membership unless the country agreed to reduce or remove its scrap export duty, which was at EUR 35 per tonne at the time. Ukraine subsequently agreed to cut the duty to EUR 10 per tonne for six years from the date of accession. Ukraine increased its ferrous scrap export duty to EUR 30 per tonne in September 2016 and gradually increased it to the current level of EUR 58 per tonne in September 2019.
The introduction and gradual increases of the export duty reduced the domestic scrap shortage to zero in 2018 from 300,000t in 2017 and around 600,000t in 2015, demonstrating the need for the export duty. But scrap market participants disagree with the economic rationale of the extension. Domestic scrap collection decreased by almost 39% in 2015-20 to just above 3 million tonne from 4.3 million tonne. And scrap exports collapsed to just 26,400 tonnes from 1.21 million tonne over 2015-20, while delivery to steelmakers fell to 2.89 million tonne from 3-3.32 million tonne. The number of scrap recycling companies in Ukraine fell to 900 today from around 1,800 in 2015.