Export Tariff of Steel Adjusted since August 1, How Will the Steel Market Reply?

SHANGHAI, Jul 30 (SMM) - As was announced by the Tariff Commission of the State Council, the export tariffs on ferrochrome and high purity pig iron will be appropriately increased, with an adjusted export tax rate of 40% and 20% respectively from August 1, 2021.

Also, effective on August 1, 2021, the export tax reimbursement for iron and steel products in the attached list to this announcement shall be cancelled. The specific implementation time shall be subject to the date of export as stated in the customs declaration.

It was the second adjustment since April 27. Some analysts believed that the impact will be relatively limited. For pig iron, the accumulated export volume in the first six months of 2021 was only 62,300 mt, which was even minor in the same period of 2020. In other words, the increase in pig iron export tax rate will affect 60,000 mt of export volume at most, thus the impact on domestic supply and demand of iron elements was negligible. For ferrochrome, the export volume reached 33,000 mt in the first six months of 2021, and the number was about 26,000 mt in the same period of 2020. After the export tax rate increased, the export volume was expected to shrink by about 10,000 mt in the second half of the year, accounting for about two thousandths of the total national demand, thus binging little impacts.

According to the announcement, the products removed from export tax reimbursement list were mainly cold process products, including cold-rolling products, galvanized products, aluminized zinc, etc. Previously, the export tax reimbursement rate of cold process products was 13%. And the export volume of cold process products accounted for a relatively high proportion among all steel exports of about 30%. More importantly, even if the 13% of tax reimbursement was cancelled, China's cold process products’ quotation was still lower than that of Japan, South Korea, India and other major competitor countries.

Also, recently, many domestic provinces announced crude steel production restrictions. If the national crude steel production this year remained flat on last year, production in 2H 2021 will greatly fall. The expanded scope of removal from export tax imbursement will weaken the price competitiveness of related steel product exports, while the increase in export tariffs for ferrochrome and high purity pig iron will affect the export orders as well. Therefore, the policy aims to give priority to domestic demand, securing national supply of steel resources.