New steel policy draws the prices down in China

New steel policy draws the prices down in China

Following the cancellation of tax rebate on steel ingots and the reduction of export rebate applied on 20 kinds of steel products, Chinese government's third step of the new steel policy came yesterday with the prohibition of iron ore, pig iron, scrap and billet/slab processing trade through which the companies have made up great profits. Thanks to processing trade, some steelmakers of China have imported iron ore, pig iron, scrap and billet/slab free of duty, processed them and exported their end-products, for which the government paid them high amounts of export rebates. Thanks to the new policy, China will start to produce more for its domestic demand. That means there will be more space for the producers from other countries in the global market. Furthermore, when the export oriented production lessens, the high energy and raw material consumption of China will also be alleviated. However, the decline in steel exports of China may inevitably turn the country into a net steel importer. More domestic supplies for the demand of the country will also lead to a decrease in imports, thus to a shrinkage in foreign trade. The shrinkage of foreign trade will in turn cause to less dominance of Chinese steelmakers in global markets. Partly due to the current policy, and partly due to the piling steel inventories in China, the steel prices have seen continuous decreases during April. On April 04, the price of 1.00 mm cold rolled coil was RMB 7'400 ($894) while the price of 2.75 mm hot rolled coil was RMB 5'630 ($680) in Shanghai. The current prices of these products are around RMB 7'400 ($894) and RMB 5'380 ($650) respectively.