Rebate issue to stir up price hike activity

SteelOrbis Shanghai The international steel market is currently still soft. Few deals have been concluded and this has led to steel prices circling at a lower level. However, the reports from the market these days indicate that China's steelmakers intend to do their best to increase steel prices and so offset the export tax rebate which will be lowered from 11 to eight percent from December 15 next by the Chinese authorities. In addition, it is widely expected that China will cancel the eight percent export tax rebate on finished steel products next year. On September 15, the Chinese government drafted their policy decision to lower the steel export tax rebate from 11 to eight percent as of December 15. As the date for the new rebate rate approaches, the Chinese steelmakers are itching to push their product prices up. Some traders in China are also seeking to increase steel prices, again in connection with the imminent rebate reduction. For instance, the price of Chinese-origin grade A36 steel plate has already been quoted at $500/mt FOB by some domestic steel mills, while the more common quotation is currently $460-480/mt. Insiders predict that, if the eight percent export tax rebate is cut next year, then Chinese steel export prices will see a quick rise. For example, the current price for A36 steel plate is $480/mt on the basis of FOB China. However, if the tax rebate is cut in 2007, a rise to roughly $518/mt is being predicted. This price will have a reduced competitive edge compared with the steel exports from other countries. It is estimated that the steel export market in China will yet see many fluctuations, with traders and steelmakers making concerted export drives ahead of the December 15 this year.