SteelOrbis Shanghai On September 14,
China's State Ministry of Finance, National Development and Reform Commission (NDRC), Ministry of Commerce, General Administration of Customs, and State Administration of Taxation jointly announced that the steel exports rebate rates on 142 product tariff codes would be cut from 11 percent to 8 percent. The announcement specified that the new policy would be effective as of September 15 2006. For export contracts signed before (and on) September 14 2006, if the products within the above range for adjustment are cleared and exported before (and on) December 14 2006, the exporting company can handle the rebate procedures according to the original rate. However, exporting companies that do this must take their contracts to the taxation authority in charge of export rebate for registration and recording before September 30 2006. Those who can not leave an official record or export before the specified date must accept the adjusted export rebate rate. The export rebate policy was finally announced after the Chinese trade surplus again broke the monthly record in August. However, this policy won't have much influence on the sensitive
steel futures market, not to say the upwardly mobile Chinese steel market. For example, hot rolled sheet prices went up instead of down, while the Shanghai market saw a slight increase. According to today's product list for rebate adjustment, in terms of long products, bars,
rebar,
wire rod and large and medium profiled bar are the most affected, as are narrow strip and medium wide strip (thickness<600 mm) among flat rolled products. Most of the rebates are lowered to 8 percent, indicating that the Chinese government is trying to control the export of low value added products. Meanwhile, for the high value added products of which
China is in short supply, the rebate rate is also decreased to 8 percent. These products include hot rolled sheet with thickness < 1.5 mm, almost all kinds of hot rolled
plate, cold rolled sheet with thickness < 0.5 mm, almost all kinds of cold rolled
plate, heavy
plate with thickness between 20-50 mm, almost all kinds of low-alloy HR and CR sheet and many kinds of
stainless steel etc..This demonstrates that the Chinese government is anxious to ensure domestic demand. Since July 2005,
production and exports of common flat rolled, medium
plate and
pipe have seen rapid increase, attracting wide attention from home and abroad. However, the rebate rate has not changed for these products. There are several reasons for this. On the one hand, these products have the problem of phase surplus - if the government lowers their rebate rates, it may affect the exports, thus harming the interests of the steel mills, especially the large number of state-owned mills. On the other hand, the history of mass
production of these varieties is not very long. In order to improve the product quality, it is essential for them to stand the test in the international market. The export rebate adjustment this time will influence the medium- and small-sized mills that produce long products, which is beneficial to the structure adjustment of the steel industries. Nevertheless, the 3 percent reduction in the export rebate rate won't have a great impact on the exports of Chinese steel products. Furthermore, with the improvement of product quality, Chinese products will become more competitive. For example, the
semis exports for this year are still huge in spite of the cancellation of tax rebate for semi finished steel. For the international market, the tax rebate adjustment will boost up long products prices in the international market to a certain extent, while flat rolled will still move along its original trend. For the domestic market, this adjustment cannot block the already-formed upward trend, but will restrict the increase range of many steel varieties.