New | Global steel prices to gain from China's scrapping of export tax rebate
Cancellation of the export duty rebate may open the door to Russia in the international market
China's cancellation from January 1 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, analysts said.
"About 30 per cent of [steel] exports are being affected by this policy change, according to January-November trade data from the customs," said Kevin Bai, an analyst at metals and mining consulting firm CRU China.
Boron is a chemical added to steel products to increase steel quality. But more and more Chinese steelmakers, including some unqualified ones, exploited this to earn export tax rebates, leading to trade friction especially with Southeast Asian countries, which imported large amounts of steel from China.
Bai estimated the decline in China's steel exports as a result of the rebate cut at less than 30 per cent as producers were replacing boron with chrome, another chemical, as an additive in steel production in order to continue to qualify for the rebate.
However, adding chrome would be costlier than adding boron. Using boron would push the cost of producing a tonne of steel up by just 4 yuan (HK$5) to 5 yuan, but it could be 40 to 50 yuan per tonne more in the case of chrome, Bai said.
Custeel, a steel industry information provider in China, estimated the country's steel exports to decline 20 to 30 per cent in the first quarter of this year from the previous quarter.