Scrap iron excluded from Turkey-Ukraine free trade deal

The Ukrainian government on February 2 approved the draft free trade agreement between Ukraine and Turkey, but scrap metal was not included in the list of products exempt from export duties or subject to duties lower.

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

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

Turkey will abolish import duties on many Ukrainian industrial products, including 510 of the 840 metal products that Ukraine sells to Turkey. In addition, Turkey will lower import duties on 130 metal products, which will benefit Ukrainian goods over Russian shipments. For 167 items, quotas of 410,000 t will be allocated, the Ukrainian government said.

But Ukraine has reserved the right to maintain an export duty on scrap “to ensure the development of national metallurgy, in particular green metallurgy”. The country has sharply increased its duties on scrap metal exports in December last year at €180/t ($203/t), valid for five years until September 2026.

Ukrainian scrap metal exports increased significantly last year after several years of extremely limited shipments. The rise in Turkish import scrap prices last year covered additional costs, such as export duties of €58/t, transport and port charges, for exporters to sell in Turkey at the place of the internal market.

Ukrainian scrap metal exports last year totaled 615,700 t, which is 17.2 times more than in 2020, according to customs data. Revenues generated increased even more strongly, by 25.2 times to reach $3,238.9 million, due to the increase in global scrap prices, which was also the main factor supporting the increase in exports.

Turkey remained the biggest buyer of Ukrainian scrap last year, accounting for 84.9% of Ukrainian scrap exports. It was followed by Romania and Poland, which held 6.7% and 3.5% of the market respectively. Ukrainian scrap metal imports totaled only 23,000 t during this period, down 13.1% from the previous year.

Ukrainian scrap industry forecast of the UAVtormet association in mid-January that the introduction of the higher duty will essentially prohibit exports of scrap metal and trigger a drop in domestic scrap prices, thereby sharply reducing exports, collections and domestic shipments.

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

By Valery Zavyazkin

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