The Ministry of Finance of the Russian Federation has prepared a draft law that enables a new tax for the metallurgical industry – an excise tax on liquid steel and the production of semi-finished steel products.

In this regard, the Association of Electrometallurgical Enterprises (AEMP) considers it necessary to state that such an increase in the tax burden carries significant risks for electrometallurgical plants that do not have their own raw material base and produce steel products by processing scrap and ferrous metal waste.

In 2015 – 2020, the maximum profitability of electrometallurgical enterprises was 10%, and their marginality is traditionally 2-3 times lower than that of vertically integrated companies. Electric steel factory’s products are made from scrap metal which they buy on a free competitive market given a constant volatility of prices. So, over the past year, the cost of scrap metal in Russia has increased by more than 90%. In addition, many enterprises have a high debt burden due to the implementation of investment projects and modernization programs.

It is worth noting that this initiative was never discussed in any form with the industry business community. In light of this, a new steel tax will lead to an unjustified additional increase in the fiscal and administrative burden on electrometallurgical enterprises. In addition, the introduction of an excise tax will inevitably lead to an increase in the cost of metallurgical products for Russian consumers.

Electric steel production in Russia is increasing every year as this is the most efficient and environmentally friendly way of producing metallurgical products from recycled materials with a minimum environmental impact. The factories invest their available funds to build high value added production facilities (top-quality rolled products, wire, fasteners) and to master new technologies with due regard to carbon regulation.

In view of the above, the Association of Electrometallurgical Enterprises calls on the Government of the Russian Federation and any parties concerned to support their stance on infeasibility of increasing the tax burden on domestic electrometallurgical enterprises.