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China cancels steel export tax rebates to boost supply

China cancels steel export tax rebates to boost supply


News is brought to you by Mr. Shailesh Karia


Published on date 29th April 2021.


From 1 May, China will revive taxes on steel exports and cut tariffs for ferrous imports in a bid to shore up domestic supply and slow the growth of carbon emissions.


Tariffs will be cancelled on imported billet, pig iron, crude steel and recycled steel raw materials and increased on exports such as high-purity pig iron, Customs Tariff Commission of the State Council, China`s cabinet, said today.


Rebates will be eliminated for the 13pc value-added tax (VAT) on steel exports, including hot-rolled coil (HRC) and rebar, that were put in place a year ago to offset a slowdown from lockdowns.


"The tax adjustments are aimed at reducing import costs and expanding imports of steel resources. It will support reduced domestic crude steel production and reduce the steel industry`s total energy consumption. This will promote the transformation and upgrading of the steel industry," the commission said.


The tax amendments, anticipated since February, are intended to slow growth in steel-sector carbon emissions ahead of a peak in 2025 and rein in soaring costs.


Iron ore prices rose to new 10-year highs this week, with steel production near record levels. Its largest mills raised crude steel output to a record level in mid-April after China`s total output increased to its second-highest level in March. Tangshan billet is holding at 13-year highs and Argus assessments for Shanghai HRC and rebar are near their highest levels since they launched in 2016 and 2018, respectively.


Beijing will cancel rebates for the 13pc VAT on exports on more types of steel products than expected. These include HRC, hot-rolled sheet, plate, rebar, wire rod, colour-coated steel and cold-rolled sheet with 0.5-3.0mm and below 0.5mm thickness. It also cancelled rebates on round bar and section, stainless steel products with width above 600mm, seamless steel pipe, steel strips with 600-880mm thickness and galvanised corrugated sheets.


It made no changes to rebates for duties on exported cold-rolled coil and hot-dip galvanised steel.


Chinese exporters began adding the cost of the VAT into offers last month or required buyers to bear the costs of any tax policy changes. The uncertainty temporarily froze export spot trade until overseas price strength pushed buyers to accept offers that included the tax costs.


The Chinese HRC export index has risen by $160/t, or 22pc, to $923/t fob China this month.


Viewpoints are mixed on whether the tax amendments will shore up China`s domestic steel supply. If the tax policy is tied in with policies to reduce steel output, as one agency has pushed for this year, it could support prices.


A significant shift in the supply from exports to imports could weigh on prices. "I suspect local steel prices in China will come down" with the cancellation of steel export rebates, a pig iron seller said.


Beijing increased the export duty on high-purity pig iron under HS code 72011000 to 15pc from 10pc and eliminated a 1pc duty on non-alloyed pig iron imports with HS code 72011.


"Pig iron prices cfr China basis are at about the $550/t level. Domestic China prices are lower than international levels and therefore the tax removal will not change short-term dynamics," the pig iron trader said.


Beijing removed a 2pc import tax on the two remaining ferrous scrap HS codes 72041000 and 72044100 that were not zeroed out at the beginning of the year. Most ferrous scrap imports are already tax-free and the two HS codes accounted for less than 10,000 t/yr over 2016-18 before the import ban that ended on 1 January.


 


Source : https://www.argusmedia.com/


 





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