On March 17, China’s Ministry of Finance (MOF) announced that steel export tax rebates for more than 1,000 items will be increased to 13 percent as of March 20, from 9-10 percent for major products at the moment.
The increases in export tax rebates for steel products will lower export costs and increase Chinese exporters’ competitiveness, positively impacting the Chinese steel industry. The effect will be seen in the HRC and wire rod export markets as the current tax rebate is 10 percent for these products. At the same time, the export tax rebate for such products as bars, CRC and plate will be unchanged as they are already at 13 percent.
It is expected that Chinese mills will be able to cut export prices by $10-15/mt thanks to the higher tax rebates. As a result, Chinese mills will be able to lower HRC offers to about $450/mt FOB, while deals will be possible at $440/mt FOB or even slightly below, sources have said. As a result, some contracts, concluded by traders in short positions earlier at $445/mt FOB, are in line with market expectations.
Wire rod exporters may cut prices from the current $455-460/mt FOB to $440-445/mt FOB in the near future to attract customers and benefit from the higher rebate announced by the government. However, despite many positive expectations, the overall outlook for demand for ex-China products is not so bright. Market analysts have said the rebates may just cushion some of the negative impact from the reduction in the steel trade caused by the outbreak of the coronavirus.
In the January-February period this year, China exported 7.811 million mt of finished steel, down 27.0 percent year on year, constituting the fastest decline since March 2018.
The steel products which will enjoy a 13 percent tax rebate include products with HS customs codes from 72052100 to 72299090, including different kinds of stainless steel, steel bars, wire, wire rod, HRC, CRC, HDG, plate and sections.