Russian Finance Ministry factors termination of steel excise payments from 2028 into draft budget

MOSCOW. Sept 25 (Interfax) - The Russian Finance Ministry has factored a termination of steel excise payments from 2028 into the draft budget for the next three years, it follows from a schedule of revenues in the explanatory note attached to the draft of the next three-year budget, seen by an Interfax source.

The document sets planned steel excise payments for 2028 at 4.3 billion rubles, compared with 51.6 billion rubles and 50.9 billion rubles for 2026 and 2027 respectively. As such, the plan for 2028 is roughly the same as the monthly norm for this line item, meaning that the Finance Ministry is only including payments for December 2027 in the revenue for 2028.

Interfax has requested clarification from the Finance Ministry.

The steel excise tax was initially introduced as a temporary measure on January 1, 2022. In summer 2024, Severstal shareholder Alexei Mordashov said in his speech at a Sberbank business breakfast that there was no chance of the excise being abolished in 2025, referring to the fact that the government had then promised to introduce it for a period of three years.

This year, metal companies talked with the relevant ministries about a proposal not to fix the cut-off price for steel excise calculations, but to instead adjust the price of 30,000 rubles set in 2022 to take into account accumulated inflation.

The Finance Ministry objected to this indexation and Deputy Finance Minister Alexei Sazanov said earlier this month that the cut-off would not be changed, as "the budget situation does not allow for it to be adjusted".

Last week, the Industry and Trade Ministry reported that it would discuss offering vertically integrated metal producers a three-month extension for excise payments and extensions for mineral extraction tax (MET) payments instead of indexation.

According to the excise tax calculation formula for vertically integrated steel producers approved at the end of 2022, the excise tax is reduced to zero if Cslyab (the export price of slabs for a calendar month) multiplied by the average U.S. dollar to ruble exchange rate for the month is less than 30,000 rubles.

According to data from the Russian Steel association, the cost of slabs exceeded 40,000 rubles per tonne in 2024, even at Russia's most efficient steelworks.

The excise formula for electric furnace steel is different. It is calculated as 0.3 of the difference between the average export price for steel billets on FOB terms in ports in the Southern Federal District and the sale price of steel scrap in the Ural Federal District, as well as half the cost of buying ferroalloys and alloying elements used to make steel products. The spread between the price of billets and scrap at which the excise is in effect is 12,500 rubles.

In August of this year, a subcommittee for improving the stability of the financial sector and certain branches of the Russian economy discussed possible support measures for the industry at a meeting, including abolishing the liquid steel excise tax for electric furnace steel enterprises and waiving the excise for new capacities with investments of at least 50 billion rubles for the active investment period and for the next three years, Kommersant wrote at the beginning of September, citing materials from the meeting.