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Eastern Europe

At the time of writing, Reuters reports that vaccinations against COVID have covered 40.7% of the population in Poland, 37.2% in the Czech Republic, 53.5% in Hungary, 13.3% in Russia, 2.8% in Ukraine and 3.9% in Belarus. The CIS is still facing a strong public resistance to taking the vaccines and therefore record numbers of deaths are still being registered in Russia this month. To increase uptake, the Russian government has been implementing several unpopular measures: for example, people who aren’t fully vaccinated cannot go to restaurants and are even denied employment. On the EU side of the region, higher percentages of people have been vaccinated and so restrictions keep being eased.

Russia’s GDP growth forecast for 2021 has been increased to 3.8% from 2.9%. However, this figure will probably be subject to further reassessment given the latest headline: on June 25, the Russian government published a decree, effective from August 1 for 180 days, implementing export tariffs on a number of grades of ferrous and non-ferrous. The tariff is set at 15% and a fixed US dollar/tonne rate of at least US$ 2321 for nickel, US$ 1226 for copper and US$ 254 for aluminium. This will be imposed on the following export-dependent grades: copper cathodes, billets, wire rod; brass and bronze ingots; secondary aluminium ingots; and unalloyed nickel and aluminium.

The reasoning behind the tariffs, according to a government statement, is to halt the growth of metal prices and to support the local market and construction industry by restoring to the state budget “120 billion roubles of excess profits” (approximately US$ 1.5 billion) made by metal producers from exports.

The news led to a chaotic two weeks in the local market: scrap yards and smelters cleared inventories in an attempt to export as much as possible before the end of July, with several major metal consumers reducing prices by as much as 25% for copper sourced locally moving into August and stopping imports of copper scrap. It is still too early to evaluate the impact but analysts are already predicting profit losses for Rusal of 27%. Smelters are also shifting annual contract negotiations from August to November/December given that, following September’s parliamentary elections, a permanent plan to replace the tariff will be presented.