Russian steelmakers propose to index cutoff price for steel excise by inflation since 2022

Russian steelmakers are proposing to index the cut-off price used to calculate the excise tax on steel, which was set at 30,000 rubles per tonne in 2022, by accumulated inflation over the past four years, Severstal CEO Alexander Shevelev said in an interview with Interfax on the sidelines of the St. Petersburg International Economic Forum.

"We have submitted our proposals to the relevant ministries. They are still being discussed. We don't know what the final decision on the excise will be," he said.

"If it's not possible to eliminate this outdated measure, which was introduced as a tax on windfall profits that are now out of the question, our proposal comes down to at least approving an indexation formula for the slab cut-off price of 30,000 rubles. We believe that it would be fair to use in calculation the cut-off price set in 2022 taking into account accumulated inflation over four years and ensure it is indexed going forward. We're waiting for the decisions of relevant agencies," Shevelev said.

The company told Interfax that Russian Steel Association proposed using the cut-off price of 30,000 rubles set in 2022 and indexing it for inflation in the years 2022 through 2025, inclusive. The production cost for slabs, even at the most efficient Russian steel plants, exceeded 40,000 rubles per tonne in 2024, data from the association showed.

Industry and Trade Minister Anton Alikhanov said in an interview with Interfax last week that his ministry is continuing to work on revising the formula for calculating the steel excise and plans to introduce a new threshold value in January 2026.

"The current level of the national currency's exchange rate is, unfortunately, essentially prohibitive for exporters. In this situation we believe it is right to work on optimizing the fiscal burden on the steel industry and reducing regulatory costs," Alikhanov said.

The Industry Ministry has said repeatedly that it supports revising the threshold for the liquid steel excise. The cut-off price of 30,000 rubles was set for vertically integrated steelmakers at the end of 2022. Under the approved formula, the excise drops to zero if the export price for slabs in the calendar month (Tsslab indicator), multiplied by the average U.S. dollar/ruble exchange rate for the calendar month, is less than 30,000 rubles. In 2024 and since the beginning of this year the threshold value for calculating the excise stayed above this level.

At the end of last year, sources told Interfax that steelmakers wanted to raise the threshold price for slabs at which the steel excise kicks in to 60,000 rubles from the current 30,000 rubles. The president of Russian Steel, Alexei Sentyurin said in January that the industry association presented calculations according to which the minimum threshold for a zero steel excise should be raised to at least 54,000 rubles.

The Finance Ministry has consistently opposed revising the excise. Deputy Finance Minister Alexei Sazanov confirmed this position in late February, saying that the "budget has been formed for three years, there is no potential for reducing the revenue base, the budget already has a deficit."

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