On July 29, China announced that it would again adjust the export tariffs for certain steel products (including ferrochrome and high-purity pig iron), and cancel export tax rebates for some steel products (including cold-rolled products and hot-dipped galvanized coil). The decisions were announced through two separate notices and will take effect on August 1. This comes as China tries to cap the domestic production of steel and curb the surging prices amid inflation fears. The measures are designed to push for the transformation of the domestic steel industry, according to Chinese media.
According to one notice (国务院关税税则委员会关于进一步调整钢铁产品出口关税的公告) issued by the Customs Tariff Commission of the State Council, export tariffs on ferrochrome, which is used to make steel products including stainless steel, will rise from 20 percent to 40 percent; and tariffs on high-purity pig iron will increase from 15 percent to 20 percent.
Previously in April, the Chinese government adjusted the tariffs for both steel imports and exports, in an effort to “reduce import costs, expand imports of steel resources, reduc[e] exports of certain products, support a domestic reduction in crude steel production, lead to the reduction of total energy consumption in the steel industry, and push for the transformation and upgrade of the steel industry and its high-quality development,” according to an unofficial translation of Chinese media. The announcement in April lowered the import tariffs to zero for pig iron, crude steel, recycled steel raw materials, ferrochrome and others. It was not a big change considering most of the MFN tariffs were 2 percent before the adjustment. In addition, it raised the export tariffs for ferrosilicon, ferrochrome, high-purity pig iron to 25 percent, 20 percent (temporary) and 15 percent (temporary) respectively. The two temporary tariff rates were further raised in the recent notice. Both of the tax adjustments took effect in May 2021.
Separately, another notice (关于取消钢铁产品出口退税的公告) issued by the Ministry of Finance canceled the export tax rebate for 23 steel products, including cold-rolled coil and coated steel products. China already canceled export tax rebates for 146 types of steel products back in April. Now the new announcement will remove the export tax rebate for the remaining 23 products. This means that starting from August 1, all 169 steel products that used to enjoy export tax rebates will no longer benefit from them.
China's new measures will inevitably have an impact on trade flows in the global steel market. However, it is unclear how much the tax adjustments will achieve the goal of easing Chinese steel exports. The tax adjustment in May led to a shipment slump of over 30 percent that month, but this decline was offset by an over 20 percent export increase in the following month. Overall, China’s steel exports for the first half of 2021 increased 30 percent compared to the year before.
