Recently, the news of repealing or scaling down export tax rebate on Chinese hot rolled coil (HRC) has been doing the rounds. SteelMint focuses on certain facts and trends in China’s HRC exports/imports in recent years to gauge the potential impact of any move related to slashing the export rebate on HRC.
During 2020, Chinese imports and exports of HRC stood at 7.39 mn t and 6.67 mn t respectively, marking a year-on-year rise of 150.46% and a decline of 25.67%.
Impact on China’s HRC market-
Judging from the import-export data available for recent years, China’s HRC exports have been trending down at a rate of 15% annually with 2020 witnessing a decline of nearly 25.7%. The import volume, except for 2020 when it recorded a notable increase, has been in the range of 7%-13.8% from 2016 till 2019 – basically stable compared with exports.
With increased exports of home appliances, automobiles and machinery by China over the years and in view of growing domestic needs, HRC has come to be exported more indirectly than directly. If the 13% export tax rebate is repealed, the export price of HRC will shoot up noticeably, leading to a high-dive in competitiveness and dampening export sentiments.
If the rebate comes down to 9%, some speculative traders abroad might refrain from buying following China’s price level catching up with that of neighbouring countries. In case there is no change in the export tax, China’s HRC exports are expected to record a marked increase owing to the recovery of the global economy and steel demand in the rest of the world. In such a scenario, HRC exports could reach 0.6-0.8 mn t on a monthly basis as was seen during 2017-2019.
Chances of tax rebate reduction-
In sync with the Chinese government’s goal of carbon emissions peaking by 2030 and attaining carbon neutrality by 2060, the authorities are making unwavering efforts to reduce crude steel output in 2021. However, reduction in crude steel output is bound to lead to hike in steel prices – a scenario which goes against the government’s design. Thus, chances of an export tax rebate cut/removal on HRC are quite high.
SteelMint assesses China’s HRC export prices (CFR Vietnam) at $740-750/t CFR.
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