What Russia’s scrap export duties did to its own market

Russia tried to keep its scrap at home with export duties, and it mostly succeeded. The lesson is not that duties fail. It is that they succeed at one thing and quietly fail at another, because the metal stays in the country while the price paid to the people who collect it falls. The Russian case is a working experiment in what happens when a government decides scrap is a strategic input.

The measures are well documented in the OECD’s Inventory of Export Restrictions on Industrial Raw Materials, which records Russian duties on ferrous scrap exports rising sharply in 2022 and remaining through the period since. The stated logic was industrial protection: keep the country’s steel mills fed with cheap domestic scrap so that steel output survives. That logic works, at least in direction. With the duty in place and European buyers simultaneously barred from Russian material under the sanctions regime, exports of Russian ferrous scrap collapsed relative to their pre-war volume, and the metal went to domestic use or nowhere at all.

What the sanctions add is unusual. A normal export duty leaves the export trade alive at a lower price. What Russia ended up with was closer to a closed market, because the European Union banned imports of Russian steel and steel inputs as part of its sanctions packages. So the duty operated on top of an effective loss of the largest nearby customer. Anyone reading Russian trade figures for the period should note that the two effects are hard to separate, and that Comtrade’s coverage of the period itself becomes patchier under sanctions.

That is the honest reading, and the price evidence is the interesting part. With export options shut, domestic scrap had fewer buyers and the leverage shifted to the mills. Collectors and consolidation yards were reported as receiving lower domestic prices for the same material, which is exactly the standard prediction for an export restriction and the one that its advocates never emphasise. The mills, meanwhile, did receive cheaper feedstock. In an economy under sanction pressure, cheap domestic scrap for domestic steel is close to the only industrial lever that still moves in the intended direction.

Why now? The duties remain, the war economy continues, and the OECD’s inventory is still being updated. The case matters more widely than Russia because several other governments have looked at the same instrument over the past three years and Russia is the clearest worked example of what happens when it is used hard. The secondary lesson is about reliability of sources: trade data under sanctions is not the same animal as normal trade data, and anyone quoting precise Russian tonnages for this period is being braver than the figures warrant.

What should happen inside Russia is obvious and politically impossible: remove the duty, or at least soften it, so collectors are paid something closer to the world price for their material. What everyone else should do is draw the correct lesson for their own policy debates. An export duty is a tax on the people who collect and aggregate material, paid in lower prices, and the beneficiaries are the industrial buyers. If a government’s real goal is a stronger recycling sector rather than cheaper mill inputs, the duty is the wrong instrument or at best half of one. Pairing it with collection support is the version that has a chance of working.

The pre-war trade was substantial in a way the wartime figures make easy to forget. Before the duties and before the sanctions, Russia was a regular supplier of ferrous scrap to Turkey and to European buyers, and its ports moved material on the same daily basis as its Black Sea neighbours. That trade is not coming back on its old terms. What replaced it is a two-track market: the official track, which is domestic, and the shadow track, which moves material through intermediaries in ways that most counterparties and most banks will not touch. The distinction is not a semantic one for anyone writing a contract, because the difference between the two tracks is the difference between being paid and not being paid.

The collector-side story is also worth separating from the sanctions question, because it would have happened anyway. An export duty that keeps a material inside a border transfers the price from the buyer of last resort to the seller of first resort. Russian collectors were not asked to subsidise the steel industry. They were simply informed by the market price that their metal was now worth less, because the alternative customers had been removed by law. That is not a unique story. The same mechanism operates in every country that has tried the instrument, which is why the Russian case is worth understanding even for traders who will never touch Russian material.

The amounts in question are impossible to state with confidence, and this is one case where the honest analysis has to say so plainly. The reporting on Russian trade flows in this period is partial by definition, and the figures that circulate are usually either unverifiable or imply a precision the underlying record does not support. That caveat is not a footnote to the argument. It is part of it: a policy’s effects cannot be properly assessed when the measurements of its effects are themselves unreliable, and Russia is not the only place where that will be true in the years ahead.

For traders, Russia is a reminder rather than an opportunity. The trade that does continue happens through documented channels, which is exactly what scrap.trade exists to make simpler. The wider pattern, governments discovering export controls as a standard instrument, is the one that actually matters for the market, and the Russian experiment is its most complete worked example. The OECD’s export restrictions inventory tracks which countries reach for that instrument, and UN Comtrade remains the reference for what flows actually survived.