Argus Media : Scrap excluded from Turkey-Ukraine free trade deal

The Ukrainian government on 2 February approved the draft of the Ukraine-Turkey free trade agreement, but scrap was not included in the list of products that are exempted from export duties or that face lower duties.

The Ukraine-Turkey free trade agreement is expected to be signed today or on 4 February at a meeting between the countries' presidents, Vladimir Zelensky and Recep Tayyip Erdogan.

More than 10,300 products from various industries, or about 95pc of typical trade items that Ukraine exports to Turkey, will be exempted from export duties. And 1,348 products will be given the lowest possible export duty, according to the document.

Turkey will abolish import tariffs on many of Ukraine's industrial products, including 510 of the total 840 metallurgical goods that Ukraine sells to Turkey. In addition, Turkey will lower import duties on 130 metallurgical products, which will give advantages to Ukrainian goods over Russian shipments. For 167 items, quotas of 410,000t will be allocated, Ukraine's government said.

But Ukraine reserved the right to maintain an export duty on ferrous scrap "to ensure the development of the domestic metallurgy, particularly the green metallurgy". The country sharply raised its duty on ferrous scrap exports in December last year to €180/t ($203/t), effective for five years until September 2026.

Ukrainian ferrous scrap exports significantly rose last year from several years of extremely limited shipments. The rise in Turkish import scrap prices last year has covered the additional costs, such as the €58/t export duty, transportation and port fees, for exporters to sell to Turkey instead of the domestic market.

Ukraine's ferrous scrap exports last year totalled 615,700t, 17.2 times more compared with 2020, customs data show. Revenues generated rose even more steeply, by 25.2 times to $3,238.9mn, because of higher global ferrous scrap prices, which were also the main supportive factor behind the increased exports.

Turkey remained the largest buyer of Ukrainian scrap last year, accounting for 84.9pc of Ukraine's scrap exports. It was followed by Romania and Poland, which held 6.7pc and 3.5pc of the market, respectively. Ukraine's ferrous scrap imports totalled just 23,000t in this period, down by 13.1pc from a year earlier.

Ukrainian scrap industry association UAVtormet forecast in mid-January that the introduction of the higher duty will essentially ban scrap exports and spark a drop in domestic scrap prices, which will consequently sharply cut exports, domestic collections and shipments.

In January, Ukrainian domestic prices for A3-grade material averaged 8,050 hryvnia/t ($285/t) cpt, down by 10.7pc. January exports totalled only 5,800t, down by 69.7pc on the year. Domestic shipments of scrap to Ukrainian steel mills reached 226,000t last month, 20.3pc lower than a year earlier. And collections were 21.9pc lower on the year at 248,100t, UAVtormet reported today.

By Valery Zavyazkin