China's imposition of a 5-10 percent export tax on various ferroalloys effective from November 1, 2006 has cooled its relations with
Japan, with the focus of the disagreement being the price of ferrosilicon.
According to reports, the ferrosilicon price in the Japanese market has increased $30/mt, while offers from
China have increased to $780/mt CIF
Japan since the enactment of the tax. Neither Chinese exporters, nor Japanese purchasers are happy with the sudden imposition of the tax. Chinese exporters are claiming some compensation from Japanese purchasers for previous deals concluded for November shipments due to the losses caused by the tax. Meanwhile, Japanese purchasers are strongly resisting and are hesitating before buying further products due to the new high prices. The deals concluded for November shipment before the imposition of the tax were around $725-730/mt FOB (equal to $740-750/mt CIF). As the Japanese purchasers are refusing to pay compensation for these deals, Chinese exporters are avoiding the shipments. Therefore, the ferrosilicon supply in the Japanese market is decreasing, while it is increasing in the Chinese market.
The problem may even lead to a political conflict between the two countries, unless a solution is found to the question of the cancelled shipments.
Japan is the largest ferrosilicon importer from
China accounting for 270,166 metric tons, or 33 percent of
China's ferrosilicon exports through January-August, worth a total of $172.36 million.