China Considering Imposing 10-25% Tax on Steel Exports
After 30% YoY surge in Chinese steel exports in H1 of 2021 to 37.4 million tonnes, the news of Chinese government imposing a tax on steel exports to cool export is in forefront recently and now South China Morning Post reported that China is considering imposing more tariffs on steel exports as it seeks to achieve twin goals of capping domestic production and taming the surging prices that have fanned concerns about inflation. According to people familiar with the matter “Potential rates being discussed range from 10 to 25% and products include hot rolled coil. Officials are seeking to implement the levies in the third quarter, though they are still subject to final approval.”
The move to concentrate on domestic supply comes after resurgent demand lifted prices to a record earlier this year. Some Chinese suppliers may raise export prices as a result, foreign buyers must either stump up or source competitively priced material elsewhere. But it might not be adequate to fill the potential deficit created by the expected crude steel output cuts in China in the second half, domestic prices will remain on the strong side for rest of the year. But, the move may tighten global markets that are seeing a steel boom as economies navigate their recovery from the pandemic. Potential imposition of export duty on steel in China will make exports lucrative for other sources.
China has already scrapped rebates on export taxes and raised tariffs on some products from the start of May to keep more supply at home and the new levies will target some products not covered by the earlier round.
China is undertaking an industrial overhaul that has seen it vow to reduce output in 2021 to curb carbon emissions from one of its dirtiest industries and has pledged to limit crude steel output in 2021 at no higher than the 1.065 billion tonnes in 2020. But China's crude steel output in H1 of 2021 grew 11.8% YoY to 563.3 million tonnes signalling that stricter measures are required
Amid escalating tensions with Australia, China has been progressively tightening the noose around iron ore for months now, with some success given recent fall in iron ore prices. Measures so far have included
Releasing strategic reserves
Punishing speculators and limiting futures bidding
Constraining steel output
Removing restrictions on scrap imports
Removing steel export rebates