China may raise export tax on certain steel product

China's finished steel exports hit a record high of 7.21 million tonnes in July a massive increase of 38% on June's 5.22 million tonnes and up by 21% YoY from the same period last year. The steep increase has fuelled up rumor that Beijing might further raise up the export tax on certain steel products.

Mills have been attempting to export as much alloy steel as possible, taking advantage of the 5% tax rebate. Currently, exporting boron added steel is more profitable than commercial carbon steel, which is levied 5% to 15% of export duty. As a result, alloy steel exports soar 395% in Q2 from the previous quarter. And the Customs has tightened the inspection of alloy steel export from June, pushing back shipments of 70,000 tonnes to 80,000 tonnes of alloy steel in June to July.

Mr Zou Xizeng steel analyst with Citic Securities said that the authority might release tougher measures targeting at alloy steel to curb the hectic export growth. However, the government would take into account of the overall market stability as well.

Sources of China Iron & Steel Association indicate that Chinese government would not rush to apply new export tax in the short term given that steel prices are falling, since new export tariff might accelerate the price decline in domestic market. However, the views on future steel export market outlook are mixed.

In the first seven months of 2008, Chinese steel exports add up to 34.15 million tonnes down by 14% from January to July 2007.

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