Russian businesses want to persuade Kazakhstan to drop the idea of banning scrap metal exports

Kazakhstan has imposed a six-month ban on the export of scrap metal by railway transport. The move can have «painful» consequences for those Russian companies specializing in scrap metal processing, according to Kommersant.

The business outlet also reported that the Association of Electrometallurgical Enterprises has appealed to the Russian government – the Ministry of Industry and Trade, the Ministry of Economy and the Eurasian Economic Commission – with the request to «persuade» Kazakhstan to change its approach to the issue. Due to the ban, the shortage of scrap metal in Russia may increase up to 500,000 tons which will affect the final product price.

According to Kommersant, before 2014, China was the main destination for Kazakhstan’s scrap metal, while Russia accounted for just 10% to 15% of this export. Then, Kazakhstan started gradually banning the export of scrap metal by cars and railway transport to other countries. That ban hadn’t prevented scrap metal exports to Russia as both countries are members of a single economic space. As a result, Kazakhstani scrap metal dealers entirely focused on Russia with the export of one million tons of the product at its peak per year.

Kazakhstani scrap metal collectors are also unhappy with the ban as they used to gain 30% more revenue from their exports to Russia compared to shipping the scrap to local metal processing entities, according to the Anti-Monopoly Agency. This export was profitable despite higher costs linked to logistics.

Kazakhstan has banned scrap metal export because local metal producers reported a shortage of scrap metal. Kazakhstani metal processing plants are just 48% loaded whereas the demand for their products such as reinforcing steel is extremely high. As a result, construction companies import 53% of their reinforcing steel from other countries.

The demand for reinforcing steel is constantly growing as the country has built more and more houses recently. The reinforcing steel accounts for 8% to 12% of the cost of a building on average. This is why the Anti-Monopoly Agency suggested banning exports of scrap metal out of Kazakhstan.

According to the Ministry of Industry, Kazakhstan needs 3.9 million tons of scrap metal per year, while the amount of collected metal waste is just around 1.9 million tons. What made things even worse was that part of this scrap metal was shipped abroad despite the acute shortage of the material inside the country.