Russian metal producers could save up to $300 million this year, after the government ended export duties on nickel and copper. Momentum is also gaining for the creation of a Russian metals giant, through mergers.

With nickel prices only a third of last February’s peak – Norilsk Nickel expects its revenues to halve in 2009. To compensate at least some losses Norilsk Nickel CEO, Vladimir Strzhalkovsky, asked Prime Minister Putin to cut export duties.

“The industry is in a very difficult situation now. The revenues of Norilsk Nickel alone will drop 50% next year. Besides we are losing in terms of competition, as our rivals don’t pay export duty on nickel and copper. In Russia it stands at 15%, so we ask you to abolish it.”

Despite a $300 million loss for budget Vladimir Putin agreed. The state is also considering the possibility to write off debts of Russia’s metal producers, worth $20 Billion.

The idea is to merge several troubled metal companies and give the state a 25% stake in the new conglomerate. Norilsk Nickel, Metalloinvest, Evraz, Mechel and potash miner Uralkali are on the merger list, according to Michael Kavanagh, Chief Analyst at Uralsib.

“The financial crisis has deepened, and the state has been forced to take a more active role, simply because they’ve been the lender of last resort to Russian business. And with the very tough financial conditions that the various players are facing, they’ve been forced to turn to the State, and consequently we are seeing this mega merger gaining steam, or gaining some momentum if you like.”

If created, such diversified miner will compete with global players like BHP Billiton and Rio Tinto, diversifying risks through different commodities and geography.
But some experts, including Aleksandr Pukhaev, Senior analyst at VTB Capital, say setting up such a conglomerate will be complex and take time.

“The government can sponsor any kind of action, but the problem is there are so many interests within that group of people, and there are so many complications that can come up, that this process can take years.”

The merger list doesn’t include aluminum producer Rusal, despite owner, Oleg Deripaska, being a key driver of the idea to create a Russian metals giant.

Rusal is also seeking state’s help to restructure its debt. However, its $14 Billion worth of liabilities keep the company in the isolation ward.