China may cancel steel export rebate around Sept 1

Tuesday, 19 August 2008 14:04:11 (GMT+3)   |  
       

Steelorbis Shanghai

In order to ease problems such as high energy consumption, pollution and the large export volume of resources products in the steel sector, the Chinese government plans to step up its measures to restrict exports.

The Customs Tariff Commission of China's State Council announced on August 15 that the interim export tariff for coke will be raised to 40 percent from the current 25 percent; the interim export tariff for coking coal will be 10 percent instead of the present five percent; and an interim export tariff will be executed on other soft coals - all effective as of August 20. Meanwhile, as for exports of aluminum alloys in the context of general trade, an interim export tariff of 15 percent will be imposed.

In the face of the continuous exports of steel products, the Chinese government has been considering the implementation of appropriate measures to ensure control of the situation. According to recent indications from bodies such as the National Development and Reform Commission, it is likely that the export rebate for all steel products with HS code 72 will cancelled around September 1, for the purpose of preventing steel producers and exporters from exporting steel products in the guise of alloy steel.

The products which have been enjoying an export rebate up to now include steel products for railways, alloy rods, alloy wire rods, carbon and stainless plates, carbon and stainless cold rolled coils, stainless hot rolled medium coil, alloy and stainless narrow strip, coated products, carbon and stainless seamless pipes, cast iron tubes and wires.

During the January-June 2008 period, China exported about 27 million mt of finished steel, while 10 million mt of this figure will be affected by the adjustment of the export tariffs, accounting for over one third of the total volume. As a result, the tariff adjustment will certainly have a great impact on the export prices of China origin products.

However, currently, the related departments have not reached agreement on whether or not to make adjustments to the definition of the chemical elements in alloy steel. If no changes are made in the definition, alloy steels with boron which were exported in large quantities during the previous period may still be exported under the category of alloy steel. In this way, export companies may feel some relief since such products will not be subject to export tariffs ranging from five percent to 15 percent, though they will not enjoy the five percent export rebate either.

Obviously, the abolition of the export rebate will have a great impact on China's steel industry in the short term, especially when the market is in such a fragile state. In the long run, with the global economic downturn and rising capacities in the steel industry, the demand for ex-China steel products from the international markets will weaken gradually. Therefore, the export volume of Chinese origin steel products can be expected to shrink by degrees.


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