China has removed its export rebate on certain steel products, which effectively discourages exports from the country.
In a move to arrest the low-grade steel production in the country, the government has withdrawn the 9% export rebate given on products such as hot and cold rolled coils in the flat segment, and long steel, which primarily used in the construction sector.
The rebate stands withdrawn with effect from July 15.
Industry experts and analysts believe this is a positive for Indian steelmakers as the price difference between local and imported steel is currently as much as $100 per tonne (approx Rs 4,620).
Imports from China could slow down and prices could stabilise.
Prasad Baji, Faisal Memon and Manan Tolat of Edelweiss Capital, in a report on June 22, said: “Currently, China exports hot rolled coils at $600 per tonne. Withdrawal of the 9% export rebate would mean $54 per tonne lesser profit for Chinese steel exporters, effectively leaving a very thin or possibly no margin.
The analysts said the news is positive for steelmakers such as Tata Steel and JSW Steel.
However, they believe the news is a negative for iron ore miners like Sesa Goa, as most of Sesa Goa’s ore is exported to China.
“The hidden agenda for this move is that this would lead to strong production cuts in China, reducing raw material prices. Ultimately, the strong pricing power of miners will reduce,” the analysts said.
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