Steel prices in the world are at an all-time unprecedented high due to strong growth in steel demand from China, USA, Europe and other emerging markets as global markets recover from a year-long slowdown with the reopening of business activities and vaccination drive.
Production cuts in Tangshan are the primary drivers of the continued price uptick in China and these measures are likely to stay in place as reduction in peak emissions by 2025 is high on authorities agenda.
Rumors about Chinese government resorting to reduction in steel export VAT form current 13% to force steel enterprises to scale down steel output for overseas markets, which surfaced in late January, have started spreading again with people saying that severe changes are being considered, including removing VAT rebate on export of some products completely.
China’s Ministry of Finance and State Administration of Taxation are expected to make this announcement soon. Industry insiders initially believed that the export rebate was not likely to be totally eliminated, but probably decrease to about 8-10% or about USD 20-40 per tonne.
But the latest chatter suggests that 13% VAT rebate on export of HR, plates & rebar etc will decrease to zero, while the rebate for CR & HDG is expected to decline to 4%, which translates to about USD 80-100 per tonne.
Therefore, if these latest reports become reality, a severe imbalance is likely to hit already red hot steel prices globally and HRC prices in other countries, already at all time high levels of USD 1475 in US & about USD 1050 in EU. Steel using sectors, already in peril, are likely facing another thunderbolt.