Ending weeks of heated global market anticipation, 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. In a separate announcement, the Ministry slashed the import duty on pig iron, crude steel and ferrous scrap– to zero from May ’21.
The government is looking to rein in burgeoning steel production by removing export incentives and facilitating imports of semi-finished steel. Chinese steel imports increased by around 65% y-o-y to 20.2 mn t in CY ’20 on lower inventories post COVID.
The move to discourage steel exports and facilitate imports of steel-making raw materials comes at a time when China’s crude steel output from 11-20 Apr ’21 stood at 3.045 mn t/day, an increase of about 4% from early Apr ’21 and 17% higher y-o-y, as per China Iron & Steel Association (CISA).
The measures will reduce the cost of importing, expand the import of iron and steel resources and lend downward pressure on domestic crude steel output, Chinese government sources said.
However, in order to guard against possible losses, many Chinese mills had factored in the export rebate cut while floating HRC export offers in the span of a month or so during which global prices have had risen steadily.
The rebate for cold rolled coil and hot-dip galvanized coil was not removed, likely because they were deemed higher value-added products, although market participants believe they could be reduced in subsequent announcements.
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