China, in an announcement today, cancelled with effect from 1 Aug’21 the 13% export rebate on 23 types of steel products, mainly CRCs, galvanised iron (GI) and silicon steel.
The announcement came jointly from the country’s Ministry of Finance and State Taxation Administration.
Further, the country’s Tariff Commission of the State Council also raised the export tax on high-purity pig iron to 20% from the existing 15%, and that on ferro chrome (FeCr) to 40% from the present 20%, with effect from the beginning of next month.
The Chinese government said adjusting of export tariffs on steel products was being done to upgrade the country’s steel industry and promote high-quality steel development.
Products for which the export tax has been cancelled include carbon and alloy steel cold rolled steel coils, plated or tinned steel plates, galvanised steel flat-rolled products, silicon electrical steel flat-rolled products, rails and steel pipes for the oil and gas industry, among others.
Silence on export tax
However, importantly, the Chinese government remained silent on the much-expected export tax.
It may be recalled China, on 1 May’21, in a similar move, had withdrawn the 13% export rebate on 146 products, including mainly HRCs.
“This move is just a withdrawal of the rebate on certain commodities which were not included in the previous list. This time, the rebate has been withdrawn from mainly CRC and GI products, whose export volumes are not that high. Therefore, the move will not impact the export market in a major way,” a market source informed SteelMint.
Chinese markets see lull
CISA in a conference today emphasised on the decision to cut steel production in H2. The weekly inventory data is positive, it said, with supply and demand both being slow. Thus, inventory has stopped increasing.
China’s production curbs are reaping results with blast furnace capacity utilisation dipping to 88% with the same for its electric arc furnaces dropping to a three-month low.
On the back of these factors, Chinese futures rose sharply today. SHFE rebar Oct futures contract closed at RMB 5,753/t, up by RMB 95 ($15) d-o-d
China’s export market remained dull due to the uncertainty over policy changes. A direct impact of this rumour is that the Chinese HRC export market has been quiet since the last few weeks with most mills holding back offers. Whatever was being offered was only from the larger mills, but at very elevated levels, at which no deals were concluded. Some of the HRC offers are currently at $1,030/tonne (t) FoB while CRCs were nudging $980/t FoB levels (with tax rebate change being charged by buyers account). Towards the beginning of Jul’21, the HRC export offers were in the range of $930-940/t FoB.
Iron ore was badly hit breaking RMB 1,100/t to recover some ground when the futures closed.
EAF mills are running at lower capacity due to higher electricity costs and seeing lower profits. But BF mills are raking in around RMB 500/t, as per a source. Finished steel prices are supportive again thanks to the output cuts. Exports are not the core focus of market at present.
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