STEEL NEWS

China steel industry body denies rumor of export tax rise

The China Iron and Steel Association (CISA) has denied rumors that there would be a rise in steel export taxes as soon as this weekend.

Some media reports, which speculated that export taxes on more than 80 types of steel might be raised by 5 to 10 percent as of June 1, had "disordered the industry's normal production and exports," the CISA said in a statement on its website.

"The rumor went against the stability of the economy and the ongoing quake-relief work," said the CISA, which stressed that the stability of export policies was key to a steady steel market.

An official at CISA's office declined to elaborate on the "disorder" when contacted by telephone by Xinhua.

However, the Shanghai Securities News reported that some exporters had delivered goods to bonded areas at coastal ports after hearing the rumors, to avoid anticipated higher costs.

China has been increasing steel export taxes and cutting rebates since 2005 as part of its efforts to curb smokestack industries and cool heated fixed-asset investment.

In the most recent move, the country raised the export tax rate on steel billets and ingots to 25 percent from 15 percent on Jan. 1.

A slowdown in Chinese steel exports has tightened global supplies and driven up world prices of steel, as well as those of raw materials for the steel industry such as coal, coke and iron ore.

Domestic prices were driven up in turn, according to the statement.

In the first four months of this year, China produced 169.8 million tons of crude steel, up 9.1 percent up year on year. But that growth rate was 12.1 percentage points lower than a year earlier, according to the National Bureau of Statistics.

The slower rate of increase, in turn, accounted for a decline of 3.5 percentage points in the growth of global steel production year on year, said the CISA.

During much of the same period when Chinese steel output was growing more slowly, world and domestic prices rose.

The CRU Steel Price Index, an indicator of world steel prices, surged 38.1 percent year on year to a record 221.9 points at the end of March, while China's domestic steel price index soared 29.61 percent to 142.31 points, according to CISA deputy secretary-general Qi Xiangdong.

China's steel industry should adopt a strategy of focusing on domestic demand and keeping an appropriate amount of exports, which would help rein in international steel and iron ore price hikes and abate domestic inflationary pressure, according to CISA.

China's largest steel provider, Baoshan Iron and Steel Co., Ltd. (Baosteel), has informally told dealers it would raise prices of steel products in the third quarter.

The price of steel plate heat commercial (SPHC) would rise by 200 yuan (about 28 U.S. dollars) a ton from 5,142 yuan in May and that of 1.0 steel plate cold commercial (SPCC) would rise 300 yuan from 5,996 yuan.

The hikes were inevitable as global prices had been running at a higher level than domestic ones, said Mysteel Research Institute (MRI) analyst Xu Xiangchun.

He said Baosteel was adopting prudent price hikes, considering a sharp increase might further fuel inflationary pressure, burden steel-consuming enterprises and affect the post-quake reconstruction.

China exported 16.25 million tons of rolled steel and billets in the January-April period, 32.1 percent down from a year earlier, CISA figures show.

If the trend persisted, total 2008 exports could fall 29.42 percent year-on-year to 48.75 million tons, above the government-set annual target of reducing exports by 20 million tons, said the CISA.

MRI analyst Zeng Jiesheng forecast that exports would rebound in the coming months but added that the government was unlikely to change export taxes before the fourth quarter.

Previous policies had proven effective, while frequent changes could be disruptive to producers and lead to a rush in exports as companies sought to avoid higher taxes, said Zeng.

In the first four months of 2008, exports of Chinese rolled steel to the European Union (Bulgaria and Romania excluded) dropped 55.1 percent year on year to 1.51 million tons, while those to the United States fell 33.1 percent to 997,000 tons.

During the same period, China sold 1.79 million tons of rolled steel to Vietnam, 66 percent up year on year.