Ukraine Imposes Scrap Metal Export Restrictions
The Ukrainian government has moved to restrict the export of scrap metal, a measure designed to halt schemes involving re-export through Poland. These practices have resulted in substantial budget losses, while also depriving domestic steel producers of raw materials. Processing scrap within Ukraine generates significantly higher revenue for the state compared to exporting raw materials. Estimates indicate that last year alone, the state lost 3.5 billion hryvnias due to the re-export of scrap.
Economic Impact of the Export Ban
Processing one ton of scrap metal domestically yields between 13,000 and 15,000 hryvnias in budget revenue. In stark contrast, exporting a ton of scrap brings the state a mere 50 to 100 hryvnias. Direct exports to third countries are also subject to a duty of 180 euros per ton. It's worth noting that Ukrainian scrap supplies account for no more than 5% of the Polish market volume.
- Exporters of ferrous scrap pay an average of 50 hryvnias in taxes per ton.
- Ukrainian metallurgical plants that process scrap domestically pay over 7,500 hryvnias in taxes per ton.
- When payments from related industries are included, tax revenue from processing a ton of scrap can reach 14,000 hryvnias.
Consequently, exporting scrap brings Ukraine 280 times less in tax revenue than processing it domestically.
A significant portion of Ukrainian scrap was previously shipped to Poland for subsequent re-export to Turkey and India. The export restrictions are linked to the need to supply Ukrainian metallurgists with raw materials, especially under the EU's Carbon Border Adjustment Mechanism (CBAM), and the growing strategic importance of scrap for producing steel with a lower carbon footprint.
Oleksiy Kushch noted that a return to duty-free export would mean a revival of non-transparent practices and renewed budget losses.
Sergiy Povazhnyuk emphasized that scrap exports generate 280 times less tax revenue for Ukraine than domestic processing.
The scrap metal export ban is a crucial economic step aimed at increasing budget revenues and supporting domestic metallurgical enterprises. This decision is expected to significantly impact Ukraine's steel market by reducing the volume of raw material exported and securing more resources for local processing. In the long term, it may also foster the development of a more sustainable steel industry with a reduced carbon footprint, aligning with international environmental standards.