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Steel Products Set to Lose Tax Rebates
2006-04-25 17:27:17      Shanghai Daily
China will probably scrap tax rebates on all steel products in the second half to discourage exports.

China will probably scrap tax rebates on all steel products in the second half to discourage exports, and steel prices will find it hard to recover, industry experts told a forum in Shanghai Monday.

The government frowns on huge exports of steel products, which consume a large amount of energy and emit pollutants during production, said Wu Wenzhang, general manager of major industry portal

Wu said tax rebates would eventually be removed on all steel products and tariff duties may even be levied on some primary and semi-finished products for export.

Another key analyst predicted the move to scrap tax rebates will probably take effect within the year.

"Tax credits could be zero by the fourth quarter," said Peter F. Marcus, managing partner of World Steel Dynamics, a leading industry consultancy based in the United States.

The Chinese government has adjusted tax policies on steel product exports several times starting last year. The tax rebate was cut from 13 percent to 11 percent for several steel products last year, and the discounts for ferroalloy and steel billet were removed last year.

According to latest customs data, China exported 6.47 million tons of steel in the first quarter, a rise of 24.7 percent from a year ago. For comparison, it exported 3.66 million tons in the first two months.

Monthly exports are increasing due to higher global prices.

"The government won't like this as it will also add to China's trade surplus," Marcus said.

He estimated China will export 15 million tons of steel this year as the export volume will decline in the remainder of the year due to government measures. Fewer exports plus increasing production would make domestic prices "hard to recover" in the second half.

The two experts also said China should use more steel scraps to make steel to reduce reliance on iron ore imports.

China's scrap reserves are low now and the country has imposed limits on the imports of steel scrap in 2001 on concerns it would affect the domestic trading market.


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