Reducing discounts on steel exports from China

As China's foreign steel trade rises steadily after the Chinese New Year lull, while international steel prices continue to climb, speculation about a possible cut in China's steel export tax breaks has intensified both in China and beyond.

Speculation that China might renegotiate tax breaks on some of China's steel products first surfaced in December last year and was prompted by comments that the Ministry of Industry and Information Technology wanted to see China's crude steel production decline this year - when growth is projected consumption of steel for the recovering domestic economy. Chinese steel associations have proposed that, in addition to domestic steel supplies, discounts should be reduced or removed as a means of limiting steel exports, according to Mysteel Global.

To date, there has been no official announcement from Beijing about this offer, but market talk about this has become louder lately. With world steel prices skyrocketing, Chinese steel exporters are hungry for increased international sales and are worried that any changes in discounts will negatively impact them at the time of contract signing.

According to a Shanghai-based analyst, talk of a cut in the discount is largely related to hot rolled coil (HRC), as HRC exports are expected to double this quarter from the same period last year due to strong external demand. Exports of hot rolled products from China, including hot rolled coils and strips, accounted for 12.5% ​​or about 6.7 million tonnes of China's total steel exports in 2020.

As of Feb 23, Chinese steel traders raised their HRC export offers to $ 700 per tonne on FOB terms, up $ 40-50 per tonne over the week. Mills typically offer CFR Vietnam at $ 720 per tonne, sources said.

In contrast, according to Mysteel Global, as of Feb. 17, the deal price on the domestic HRC market in the US rose to a 60-year high at $ 1,312 a tonne for April delivery.

Industry insiders in markets with close steel trade relations with China are interested in any specific news of discount cuts. A Pakistani steel merchant feared that any cut in the discount could push the already sky-high prices of Chinese products even further, as Chinese sellers could add additional margins to their sales prices to offset the loss of Beijing's subsidies.

However, he believed that in the long term, exports