Since April 1 this year China's export rebate has been raised from five percent to 13 percent for certain steel products including CRC, galvanized coil, alloy-added rebar and others. However, the effect of the rebate increase on the market has turned out to be minimal. It will be beneficial to take a look at the export situation in China as regards alloy-added rebar in April, the first month after the rebate changes, in order to illustrate the limited impact of the rebate change.
Both market feedback and official statistics point to the minimal impact of the increased rebate rate on China's export activity. Almost all exporting mills contacted by SteelOrbis stated that they did not receive any extra orders in April, and that they have continued to experience great difficulties in reaching agreement on prices with buyers. The Chinese customs figures corroborate what the exporters say:
China's rebar/wire rod exports in April in metric tons
April | March | February | |
Alloy-added bar/rebar | 29,138 | 29,239 | 74,029 |
Common rebar | 19,077 | 42,748 | 31,399 |
Alloy-added wire rod | 46,498 | 44,655 | 69,431 |
Common wire rod | 4,304 | 15,797 | 11,361 |
The above table indicates that the volume of alloy-added bar/rebar exports did not see much change from March to April. Meanwhile, the export volume of alloy-added wire rod, which is subject to a five percent rebate rate, increased just slightly in April compared to March.
Thanks to the rebate change, Chinese export quotations for boron-added rebar dropped from $480-490/mt in late March to $450-460/mt in early April, marking a decrease of $30/mt. Meanwhile, domestic market prices hit a new price low, with the price of HRB 400 declining to RMB 3,200/mt. As a result, mills were willing to make significant concessions in prices in order to liquidate stocks, and so some mills gave export offers for boron-added rebar as low as $410-420/mt FOB. However, the Chinese exporters then met with difficulties in the international market. Firstly, demand failed to register any improvement. Secondly, supplies at more competitive prices were available in the international markets from other countries: cheaper rebar supplies from Japan, Taiwan and South Korea were to be found in Southeast Asia, while more competitive Turkish and CIS material was available in the Middle East. In early April, South Korean rebar was exported to Southeast Asia in the price range of $410-415/mt CFR.
During the second half of April, the rebar export prices from other countries rose steadily in line with the rebound in the scrap market, with the result that the gap with Chinese offers was narrowed. In particular, after the consumption of its domestic inventories, South Korea resumed its rebar purchases from China and a few small size orders were realized at the abovementioned low price (i.e. $410-420/mt FOB). However, from the second half of April up until recently, the Chinese market registered a rapid rise, which had the effect of pushing China's export prices out of the reach of overseas buyers. In comparison, the rise of prices in the international market lagged behind the increase rate of prices in China's domestic market, and so the export flow from China halted again. Current Chinese export offers for boron-added rebars have recovered to the level of late March, i.e., to $480-490/mt FOB.
In brief, the Chinese rebar export price has consistently remained higher than the international level no matter whether the market goes up or down. Thus, the rebate adjustment has not brought the expected benefits to the Chinese exporters and the situation does not look like it is going to improve. In this context, Chinese policy makers are considering further steps for the alleviation in the near future of the difficult export situation. Their next move will be awaited with interest.