China’s export tax rebate for steel products cut to 8% from 11%

The reduction in the export tax credit is symbolically important because it demonstrated that policymakers in China are determined to curb steel exports.

However, given the still relatively high price of HRB on the world market ($545 per tonne, FOB the port of export, according to the September 11^th SteelBenchmarker^TM report) and the low price in China, we don’t think that a $15 per tonne increase in exporting costs will reduce Chinese exports appreciably.  In fact, exports from China may continue to rise since both the trading companies (who are buying steel for domestic use but are also re-exporting it) and the steel mills will still be able to obtain a higher price when exporting than when selling domestically.

We understand that mid-sized steel mills in China have been exporting 5 mm-thick hot-rolled band at $460-470 per tonne, FOB the Chinese port of export, which compares to the export price for Tier I steel mills outside of China of about $560-570 per tonne, FOB the port of export.  Chinese traders, meanwhile, have been exporting at $430-440 per tonne.

Perhaps, because the Chinese mills’ export price is already so deeply discounted, they will be able to boost the price.  More than likely, WSD suspects, the domestic ex-works price might be driven down by about $15 per tonne.