Tax for imported cement returns in Russia

Tax for imported cement returns in Russia
Published: 21 November 2008

According to Mr Victor Kovshevny the President of Cement Suppliers and Consumers Association said that in August the Government decided to prolong the 0 per cent tax “but no resolution was signed and five per cent tax automatically returned. He said that cement importers think that five per cent tax return is not accidental and it will be even increased. He said that “Taking into account difficult situation in the market the Government will rather confirm 10 to 15 per cent tax than prolong 0 per cent tax.”

In August Russian Government decided to prolong the tax for another year but related document has not been issued yet. Officials promise to return the tax. Traders are sure that due to the difficult economical situation in Russian cement industry the government will rather increase the tax to 10 to 15 per cent. 0 per cent tax aimed to decrease cement prices which soared by 70 per cent in 2007 and reached RUB6000/t at the peak of the season. The volume of imported cement in January to September of 2008 since the cancellation of the tax exceeded 6.5Mt whereas in 2007 a little more than 1Mt were imported.

Gross of imported cement along with demand decrease caused by construction rates slowing led to cement prices drop. In last half year the price declined by more than 35 per cent and now it makes RUB 2800/t to RUB 3000/t.

Mr Ekaterina Scheglova Commercial Director of “Jug Zerno T said that several cement importers confirmed that they already received notices from regional customs offices about the tax. He said that “On November 14, 2008 we expect a ship with 3000t of cement and all calculations were made according to customs notice.” He added that “Garant Cement” and “Lafarge Cement” expecting cargo from Turkey are also are ready to pay the tax.

Mr Vladimir Murov CEO of “Garant Cement”said that “Foreign manufacturers have to decrease their ex works prices by the amount of the tax. And even if it is just RUB100, at current prices in Russia they already work with minimal profitability.” According to his calculations the cost of cement manufacturing in Turkey makes about RUB1350/t, in Russian ports cement cost is about RUB 2700/t. He said that at 10 to 15 per cent taxes many Western exporters can reduce their shipments to Russia.