China adjusts its export structure for pipes

Wednesday, 18 July 2007 14:11:52 (GMT+3)   |  
       

In 2007 the Chinese pipe industry has experienced enormous changes as regards exports. In the first quarter, due to the weak pipe market, production growth slowed down considerably, only increasing by 11.29 percent from the previous quarter while welded pipe production only rose by 6.4 percent. In April, driven by domestic and international demand, production growth hit its highest point, with output reaching 3.44 million tons. Following the peak in 2006 (1.7 million tons exported in the first five months), during Jan-May 2007, pipe exports increased by an impressive 106.9 percent. On the one hand, the statistics indicated high demand from the international market. On the other hand, in anticipation of the impending tax rebate cancellation, exporters did their utmost to push through as many exports as possible before the enforcement of the new policy.

In the first five months of the current year, exports of high-tech & high value-added pipes have increased greatly, as have exports of other less expensive pipes. Among imported pipe products, though the share of seamless OCTG and boiler pipes is down a little, these categories still account for 83.75 percent of imported seamless pipes. The statistics show that China still relies on imports for high grade, anti-corrosion, non-API thread and alloy high pressure boiler pipes. Furthermore, it is also interesting to take a look at the big gap between the import and export price levels. For example, the average export price for seamless OCTG pipe is about $1,217/mt, while the import price is about $2,999/mt. Meanwhile, the average exporting price for boiler pipe is around $1,217/mt, whereas the imported price is approx. $5,818/mt, almost five times higher.

Though China is the biggest pipe exporting country in the world, the status quo as regards the country's exporting structure is not desirable. Recently, the US alleged that welded standard pipe imports from China to the United States are being dumped, supported by subsidization on the part of the Chinese. Under US pressure, the Chinese government adjusted its export tax rebate policy - a move expected to ease tensions with trading partners and to foster the domestic development of high-tech steel products. On July 1, 2007, the welded pipe tax rebate was canceled while the seamless pipe rebate was reduced from 13 to 5 percent. However, oil casing (welded and seamless) and tubing still enjoy a 13 percent tax rebate - a clear indication of the Chinese government's determination to encourage exports of high-tech and high value-added products.

With the adjusted rebate policy, China will surely lose considerable export-based profits. However, taking high energy consumption and long-term interests into consideration, it is likely to prove very worthwhile to sacrifice short-term interests and build up the long-term competitiveness of Chinese high-end products in the world market. Actually, to some extent, the current juncture may be considered to be a turning point for China on its way from being just a big pipe country to becoming a pipe giant. In this context, China Pipe Association secretary general Kong Lingming, stated at the China Pipe Salon 2007 that the tax rebate would be canceled if there no decrease was seen in pipe exports after July 1.


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