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UPDATE 1-Russia nickel duty to range from 5 pct upward

Published 08/20/2009, 07:33 AM
Updated 08/20/2009, 07:36 AM
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* Base export duty 5 percent with nickel at $12,000/T

* Modest, staged rises when prices exceed $15,000/T

* Full tariff scale expected in September

* Effect on Norilsk Nickel limited -- analysts

By Aleksandras Budrys and Darya Korsunskaya

MOSCOW, Aug 20 (Reuters) - Russia expects to restore nickel export tariffs at a base rate of 5 percent in a move that could bring $140 million into state coffers in each of the next three years, government sources said on Thursday.

The tariff will differ from the flat 5 percent rate applied until February by allowing modest, staged increases when nickel prices exceed $15,000 a tonne.

Analysts said Norilsk Nickel would suffer no more than a small dent in revenues. Two government sources, speaking on condition of anonymity, said the 5 percent tariff rate would be applied when the nickel price was at $12,000 a tonne or above. Three-month nickel on the London Metal Exchange is worth over $19,000.

The sliding scale of duties was proposed by the Russian government's Commission for Protective Measures in Foreign Trade and announced late on Wednesday, with no further details. A source in the commission told Reuters the 5 percent rate would be applied up to a price level of approximately $15,000 a tonne, although the exact level had yet to be decided.

"If prices rise further, the rate has to follow suit. But new rates have yet to be calculated by the government," he said.

A second source in the commission said he expected the full range of tariffs to be set in September.

"After $17,000 and after $20,000 (per tonne), the fiscal burden is not expected to rise very much from the 5 percent," the second source said.

LIMITED EFFECT ON NORILSK

The government lifted the 5 percent tariff on nickel and copper exports from February in an attempt to help Norilsk and other producers of the two metals ride out the economic crisis and a sharp drop in commodity prices.

The three-month LME nickel contract this month rose above $20,000 per tonne, the level it held in August 2008 before plummeting to about $9,000 a tonne.

"Considering the spectacular rebound in base metal prices over the past quarter and severe budget woes, we consider the decision to increase effective taxation on the sector in the form of export duties to be well-reasoned," Troika Dialog brokerage said in a note.

The Finance Ministry, in its forecast of federal budget revenues for 2010-2012, has calculated revenues from the new nickel tariff at 4.5 billion roubles ($141 million) per year.

VTB Capital analysts said the renewal of export duties could add about $70 million to Norilsk Nickel's costs in the second half of 2009.

"However, this amount is not critical ... as it is just 2.6 percent of Norilsk Nickel's 2009 full-year EBITDA estimated by consensus," it said. (Editing by Robin Paxton)

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