Home / Commodities / Freight News / Steel traders alert for China steel export rebate cuts

Steel traders alert for China steel export rebate cuts

With China’s foreign trade in steel steadily picking up after the Chinese New Year holiday lull while international steel prices keep soaring, speculation regarding possible cuts to Chinese export tax rebates on steel has become more intense both in and out of China.

The speculation that China may revise tax rebates on China’s certain steel products first arose last December and was sparked by comments that the Ministry of Industry and Information Technology wanted to see Chinese crude steel output decline this year – when steel consumption is forecast to increase, thanks to the recovering domestic economy. Chinese steel associations proposed that in order to supplement domestic steel supply, rebates should be cut or removed as a means to limit steel exports, as Mysteel Global reported.

To date, there has been no official word from Beijing on the proposal, yet market chatter on the subject has been getting louder recently. With global steel prices soaring, Chinese steel exporters are itching for more international sales and are concerned that any changes in rebates will negatively affect them at the time of signing contracts.

The talks about a rebate cut heavily relates to hot-rolled coil (HRC), as HRC exports are expected to double on-year this quarter due to the robust foreign demand, a Shanghai-based analyst estimated. China’s hot-rolled steel exports including hot-rolled coils and strips accounted for 12.5% or around 6.7 million tonnes of China’s total steel exports in 2020.

As of February 23, Chinese steel traders had raised their export offers of HRC to $700/tonne FOB, up by $40-50/t on week. Mills are generally offering at $720/t CFR Vietnam, sources said.

In contrast, as of February 17 the domestic HRC transaction price in the U.S. had reportedly surged to a 60-year high of $1,312/t for April delivery, as Mysteel Global reported.

Industry insiders in markets with close steel trade relations with China are asking around for any definite news of any rebate cuts. A Pakistani steel trader feared that any rebate reduction might send the already “sky-high prices” of Chinese products even higher, as Chinese sellers might add an extra margin to their sales prices to offset their loss of Beijing’s subsidies.

Yet he believed that in the long run, exports of Chinese hot coils to Pakistan might not be impacted greatly, saying that once the prices return to a “normal” level, then the cuts will have little effect. “Even with a rebate cut, Chinese prices will be more competitive than others,” he stated.

During 2020, Pakistan was China’s fourth largest importer of HRC after Vietnam, South Korea and Saudi Arabia.

For other shippers like the Japanese mills, the concern is more about China’s imports. “Recently, China has become a large buyer of Japanese steel (and) if the Chinese government cuts rebates on steel exports, more Chinese steel will remain in the country which, in turn, may reduce market space for imported materials,” a source in Japan said.

China was Japan’s largest export market for HRC in 2019, and the second largest last year, taking around 1.7 million tonnes of Japanese HRC in both years, according to the Chinese customs statistics.
Source: My Steel

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping