China’s export volumes went up by 6% m-o-m to 7.97 mn t in Apr ’21 against 7.50 mn t in Mar ’21. It jumped by 26% on the year against 6.31 mn t in CPLY, as per the data released by the General Administration of Customs, China.
Nation’s export volumes reported an increase m-o-m since traders have liquidated their inventories as they don’t want to bear losses and enter into negotiations with customers due to changes in export rebate tax.
China has finally annulled the 13% value-added tax (VAT) rebate on exports of 146 steel products from 1 May ’21 that include hot-rolled coil (HRC), wire rod and re-bar as well as cold-rolled and galvanized sheets, according to a statement issued by the country’s Ministry of Finance.
Will exports reduce in upcoming months?
1. Removal of tax discourages exports- The move has been taken to discourage steel exports and facilitate imports of steel-making raw materials. The measures will reduce the cost of imports, expand the import of iron and steel resources and lend downward pressure on domestic crude steel output, Chinese Government sources said.
2. Importers procuring HRC from India- Amid the announcement of export rebate cut, Chinese mills have factored in export rebate cut while raising HRC export offers globally. Due to this Vietnam importers actively started procuring HRC from India for May-June shipments since they don’t want to take any risk of losses due to export rebate cuts.
3. Robust domestic demand- Mills are gaining more profit at domestic HRC prices over exports on better domestic demand. Yesterday, domestic HRC prices stood at RMB 5,910-5,920/t against RMB 5,760-5,770/t (Eastern China). Domestic HRC market prices have touched new highs since July 2008. Thus, mills have started focusing on domestic markets over exports.
4. Nation aims to reduce its steel capacity and utilize material domestically- China aims to reduce the annual steel output by at least 20 mn t in 2021. But the domestic steel output grew 36.6 mn ton this year and another 10 mn t may be added in April. This means that over May-Dec ‘21, China needs to trim at least 66 mn t of steel output to achieve the annual production reduction target.
Near term outlook- SteelMint expects that Chinese steel export volumes may shrink in upcoming months on the announcement of export rebate cuts and robust demand in the domestic market.
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