CISA Denies Report of China Cutting Steel Rebates

Reports that China will cut export tax rebates on flat steel products is "rubbish", a senior official at the China Iron and Steel Association told Reuters on May 26.

Qi Xiangdong, CISA's deputy secretary general, dismissed local media reports that China's Ministry of Commerce planned to scrap a 9 percent rebate on hot-rolled products and cut the rebate on cold-rolled products to 9 percent from 13 percent.

"I've just seen these reports -- totally rubbish -- nothing like this will happen," Qi said. "What the government is trying to do is planning changing policies on tolling trade for some semi-finished steel products, not for steel products."

The tolling trade crackdown is part of the government's efforts to shut down polluting producers, but it would have a very small impact on the overall steel market, he said.

Speculation about Beijing clamping down on steel exports by cutting or removing rebates in order to shut down inefficient steel mills has caused market jitters in the past few days.

"Steel mills and traders are aware of this news and we are very concerned since our exports business has sharply shrunk since May," said a trader in Beijing.

A weaker euro and the threatening appreciation of yuan currency have worsened export deals for Chinese mills, while the current rebates have been the only way to help traders compete with growing supplies from mills in India, Russia and elsewhere in the former Soviet Union.

One report, in the 21st Century Business Herald on May 26, cited an unnamed sales executive at Hebei Iron & Steel Group as saying the government was considering cutting the rebates but had not yet made a final decision.

"This news is spreading quickly, causing growing concerns for us, and if it is true, our exports will be dramatically dampened given our export market has already been weak," said an export official with a major Chinese steel mill.

The Chinese government changed export duties and rebates on steel products several times in early 2009 to support the industry as the financial crisis dented steel demand. But Beijing also wants more restrictions for exporting low-end steel products to reduce pollution and energy waste.

China's exports of steel products in April reached the highest monthly volume since October 2008, when the financial crisis hit global steel demand. Since then China's steel output has posted repeated record highs, while its exports have prompted several complaints about it unfairly subsidising exports and dumping them in overseas markets.