China will set up export licensing for most steel and raw material products from January 1, 2026, as announced on December 12. The market assesses this as not being a big threat for export volumes generally but the main impact may be on the non-VAT business, with low offers disappearing again. The local market will have higher supply due to the move, but for a very short period.
History background
In May 2007, China implemented a license system for 83 items as steel exports indicated significant rises, which raised government worries about the negative impact on supply to the domestic market.
In 2009, the global financial crisis reduced the demand from overseas markets and so China canceled its license system as of January 1 that year, stimulating steel enterprises to compete in the global market.
After a gap of 16 years, China will re-implement the license system, on 300 items, reflecting big changes in the market situation.
Process of licensing
For now, there is still a lot of uncertainty in the process, but, in practice, the process of exporting steel goods from January will involve such steps: sign the contract (needs to match the declared product/HS code), then obtain the manufacturer-issued quality inspection certificate (explicitly required), then apply through MOFCOM/delegated local authority, and use the license for customs declaration. One of the steel exporters in China commented to SteelOrbis that on paper the export license issuing agency should issue the license within three working days after receiving a compliant application. But in market practice the clock starts only once your file is "complete" and companies may still experience delays in getting the manufacturer's quality inspection certificate and in matching contract details to the HS code/product description, etc. “This is not a move to curb exports, but rather to introduce a licensing process, and, once the mechanism is better understood, the long-term impact should be minimal,” a Chinese source said.
According to a number of market sources, if the documents are complete, it might take enterprises two weeks in total to submit them and get the license, while more time, for instance three weeks, could be needed as it is a busy time approaching the end of the year or if there is something missing, which needs to be re-submitted.
Short-term impact
As for the short-terms impacts, there are two major points, SteelOrbis has learned from the market.
- Another effort to curb non-VAT business
“The target is to strike and regulate the non-VAT business. The real impact we still need to see, but, for normal export business, there is no real impact since we just need one more step to apply the license, then there’s nothing different,” a top-five Chinese trader told SteelOrbis. The Chinese government had already made a few attempts to curb cheap non-VAT steel exports, but none of them have fully worked so far. The last time - in April 2025 - it tightened tax regulations on China’s steel exports, including strict tax registration checks, aiming to eliminate tax evasion.
After the new export licensing was announced, non-VAT offers (the most popular in the HRC and wire rod segments) have already almost disappeared, market sources confirmed. This has led to some gains in market prices, assessed by market sources as being artificial as they are not connected with any demand support or other fundamental factors.
For instance, non-VAT wire rod offers seen at as low at $445-450/mt FOB have disappeared from the market, with regular offers generally not below $460-470/mt FOB.
As for HRC, the tradable prices for Chinese SS400 HRC are stable at $455-465/mt FOB, while non-VAT offers, seen as low as $445-455/mt FOB last week, are no longer available.
It is yet to be seen if non-VAT offers have gone forever or if exporters will find other ways. “In my opinion, there is a short-term and negative impact on taking orders, because the low price will be gone. But as long the big volumes [for exports] are there and the real estate industry is still reaching the bottom, there will always be ways out for exports,” one of the major steel exporting traders said.
The license system has designated steel billets and ordinary hot rolled coils as the first group of products subject to tightened oversight, some other market sources added. They expect that the export volumes of billets and HRC will likely decrease by 20 percent, at least in the near future.
- Rise in supply locally in China
“Although export sentiment may improve, the domestic market could face added supply pressure from material previously allocated for non-VAT exports,” another Chinese source commented. The daily rebar price on average has increased by RMB 7/mt ($1/mt) to RMB 3,280/mt ex-warehouse, but the average HRC price in China has settled at RMB 3,330-3,370/mt ex-warehouse, with the midpoint at RMB 3,335/mt, down RMB 5/mt from the previous day, according to SteelOrbis’ data.
Long-term impact
For now, major market sources do not see a long-term impact on Chinese steel exports. However, an exporter with a trading volume of over 3 million mt per annum commented, “From now on, exports will be something that are controlled by the government. And if they really want to affect or change anything in the future, they may do it because now they have a tool in their hands.”
Also, the impact may be long-term for some steel items as China aims to not only control the export volume but also promote the adjustment of the product structure. China’s move this time is also in line with the green-transition drive seen in Europe. For low-end, high-energy-consumption, high-emission products, the cost of getting an export license will keep rising until they are simply priced out, which will force enterprises to upgrade their products, according to market sources.