China to Eliminate Export Tax Rebate for Hot Rolled Steels on July 15

Chinese government announced on June 22 the government eliminates tax rebate for some items of exporting steel products effective on July 15. Tax rebate will be eliminated for all items of hot rolled flat steel, cold rolled wide strip with more than 3 millimeters of thickness, large-size H-beam with more than 80 millimeters of width and others. Meanwhile, 13% tax rebate will be unchanged for cold rolled wide strip with less than 3mm of thickness, surface treated steel sheet and other high value added products.

Chinese steel export expanded in April-May with an expectation export tax rebate rate would be lowered. After July 15, the export is forecasted to decrease in response to high volume outflow in April-May and underlying trend of surging yuan rate.

The government eliminates export tax rebate for steel products whose tax rebate rate was raised from zero to 9% in June 2009, including silicomanganese steel bar and wire rod. Hot rolled flat steels represent large volume in the total steel export and, consequently, tax rebate elimination may have large effects. Meanwhile, Chinese hot coil export is mainly occupied by large steel makers such as Bao Steel and Anshan Iron & Steel. These steel makers wouldn’t be affected seriously in cost and export strategy aspects.

The government sets export tax rebate rate unchanged at 13% for electrical steel sheet, galvanized steel sheet, tin plate, steel plate and some items of steel tube, those which are high value added products. Japanese concerned sources analyze the background of rebate elimination for hot rolled flat steels and cold rolled coil with more than 3mm of thickness is that steel sheet demand is strong in Chinese domestic market and the government aims to increase the supply for domestic market.

Chinese steel export totaled 17.96 million tonnes for January-May 2010, 2.3 times of the same period of the previous year. The monthly export exceeded 4 million tonnes in April for the first time since October 2008 and continued to increase for 3 straight months to 4.94 million tonnes in May.