Daily analyst comments
Export duties on copper and nickel may be increased in 2011 or earlier
22.07.10 11:11
An official spokesperson for the Finance Ministry reported about a possible introduction of the copper export duty and alteration of the export duty on nickel in 2011, or even earlier. Export duties on base metals could impair NorNickel financial results; however, given the company’s robust margins, the effect on its fair value is unlikely to be critical. Among small-cap non-ferrous metal makers, Yuzhuralnickel is the company that is likely to be affected the most.
An official spokesperson for the Finance Ministry reported July 21 that an export duty on copper could be introduced, and the nickel export duty could be altered in as soon as 2011, or even earlier. In particular, the copper duty could be set at 10%. For nickel, a progressive scale can be introduced, with a minimum rate of 30% instead of the current 5%.
We recall that the Finance Ministry has already assumed an introduction of base metal export duties in 2011, but has voiced the target rate on nickel exports at 15%. In early 2009, when the crisis was in full play, the government zeroed export duties on nickel and cathode copper from the previous 5% and 10%, respectively.
Export duties could eat into NorNickel financial results. At the same time, given the company’s robust margins, the definitive effect on the fair value is unlikely to be critical. Among small-cap base metal makers, the company that is likely to be affected the most is Yuzhuralnickel, where cash flows could be impacted due to low profit margins. Our 12-month target for MMC Norilsk Nickel (RTS: GMKN) is USD 168 per share.