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Analysts view on China cancelling VAT rebate on boron added steel exports

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South China Morning Post reported that analysts said that China’s cancellation from January 1st of an export tax rebate on steel alloys that contain boron may provide support for international steel prices and prompt Russia to fight for market share in the trade.

Mr Kevin Bai, an analyst at metals and mining consulting firm CRU China, said that “About 30% of steel exports are being affected by this policy change, according to January-November trade data from the customs. The decline in China’s steel exports as a result of the rebate cut at less than 30% as producers were replacing boron with chrome as an additive in steel production in order to continue to qualify for the rebate. Chrome would be costlier than adding boron. Using boron would push the cost of producing a tonne of steel up by just CNY 4 to CNY 5, but it could be CNY 40 to CNY 50 per tonne more in the case of chrome. Chinese steel prices kept dropping due to weak domestic demand, low iron ore prices and an oversupplied market. So this policy is expected to put further pressure on domestic prices.”

Custeel, a steel industry information provider in China, estimated the country’s steel exports to decline 20 to 30% in the Q1 of this year from the previous quarter. 26.2 million tonnes of steel containing boron were exported from January to November last year. Mr Hu Yaping, the chief analyst at Custeel, said that “Steel exporters would have to raise steel wire export prices by 25% to stay profitable.”

Mr Joey Chen, an analyst at Daiwa Capital Markets, said that “In a more extreme case, China’s steel exports could be reduced by about 15 million tonnes due to the policy change. Decline in supply in the international steel trade could provide support for prices, but the worsening oversupply at home would put pressure on domestic prices.

Source – scmp

Zhejiang Yaang Pipe Industry Co., Limited

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