August 30, 2008
Beijing yet to reach tax settlement on steel export
Beijing News cited a well informed Chinese industrial source as saying that China Iron and Steel Association convened an internal meeting regarding China's steel product exports in which the National Development and Reform Commission proposed to increase the export tax of steel billet to 25% from the current 15%, raise the export tax of hot rolled sheet and long products to 15% and cancel export tax rebates for high value added steel products.
According to the source in the meeting, officials from both the China’s ministry of finance and the CISA spoke in opposition to the proposal, arguing that it would be too harsh on domestic steel mills. Mr Zhang Jingang vice secretary general of CISA said that "They will continue to discuss a feasible policy in the future, as the NDRC insists that steel product exports should be lowered further in order to help maintain a trade balance, but so far no consensus has been reached."
He added that any further change in export tax in short term would exert shock on China's steel export, cautioned an industrial analyst. However, each coin has two sides. Restricted steel export would reduce China's demand for iron ore and give Chinese steelmakers better leverage over the upcoming ore price talks. Meanwhile, steel export quota system has also been proposed at the meeting. Some industrial insiders believe the quota system could help cool down China's hectic steel ouput expansion, dampen its surging demand for iron ore and bulk vessels, which would in turn help mitigate the intensifying friction with its major trading partners.
Mr Men Chaohui senior executive of Delong Steel, told the newspaper that NDRC's proposal may have little impact on China's steel export since higher export tax would again widen the price spread of domestic market and international market given current robust demand in overseas market. His view is echoed by a sales manager of Baosteel's trading unit, who wished to remain anonymous. He warns that domestic steelmakers would shoulder harsh cost pressure once the tax rebate on high value added steel export is removed.
(Sourced from Mysteel.net)
