Russia's government has decided against slapping export duties on steel firms but has asked them to switch to long-term contracts with consumers to prevent sharp price rises, government sources said on Monday.
A decision has been taken not to introduce export duties as people are more inclined toward long-term contracts, one government source told Reuters.
The comments follow a meeting of major Russia steel companies with deputy prime minister Igor Sechin after oil firms complained about sky-high prices for steel products, including pipes needed for building new oil and gas pipelines.
Steel companies in turn blame soaring coal prices for the increase in prices for their production.
Market analysts have said introduction of export duties would badly affect profitability of the steel industry.
If steel prices continue to increase, taxes for the sector may be raised, analysts from Deutsche Bank said in written research.
Long-term contracts would set exact pricing formulas between coal, metals and pipe producers. The government is scheduled to hold another meeting to discuss the situation in the industries in July.
Analysts from Unicredit said the introduction of long-term contracts would not significantly affect the earnings of steel majors like MMK, NLMK and Severstal as they already have long-term contracts with the main domestic consumers.
In addition, steel makers will likely attempt to account for possible fluctuations in steel prices for the whole year when contract prices are set, Unicredit said in a note. (Reporting by Polina Devitt; Writing by Dmitry Zhdannikov; Editing by Quentin Bryar)
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