China adjusts tariffs, tax rebates for steel products to secure supplies amid carbon drive

BEIJING (Reuters) -China will exempt temporary import tariffs for some steel while removing export tax rebates for most of its steel products, the finance ministry said on Wednesday, as the world's top steel producer seeks more materials to feed domestic demand.

The Ministry of Finance said in a statement https://bit.ly/3gJZIMF, citing the State Council, that temporary import tariffs for products, including pig iron, crude steel, recycled steel raw materials and ferrochrome, will be waived from May 1.

Export tax rebates for 146 steel products will be removed, also effective May 1, the ministry said in a separate statement https://bit.ly/3t2kDNs.

"The adjustments on tax rebates are beyond market expectation," said Wang Yingwu, analyst with Huatai Futures. "The market had expected the measures would be towards hot-rolled steel products, but cold-rolled steel are now involved as well."

About 33.35 million tonnes of steel exports could be affected from exemption of tax rebates, Tang Chuanlin, analyst with CITIC Securities, estimated.

China exported 53.67 million tonnes of steel products in 2020 and brought in 20.23 million tonnes of the metals.

"This is a preparation to fill supply shortages at home on overall steel production cuts," according to Tang.

Meanwhile, the country will also raise temporary export tariffs for high-purity pig iron and ferrochrome to 15% and 20%, respectively, according to a statement on the ministry's website. Export tariffs for ferrosilicon will be hiked to 25%.

The changes will guide the ferrous sector to reduce total energy consumption and encourage a transformation and upgrade of the sector, the ministry said.

China churned out 1.065 billion tonnes of crude steel in 2020. It had pledged to cut its steel production this year to reduce emissions as the ferrous sector, which accounts for 15% of the country's total carbon emission, is one of the main battlefields for the carbon neutrality goal.

"The measures will help to lower import costs, expand imports of steel resources, and support a cut in domestic crude steel output," said the statement.

The China Iron and Steel Association also expected new tariffs could help ease surging iron ore prices, it said at a briefing on Tuesday.

"But it would be the market and price spread with other countries that decide how much trade volumes can be affected," said Luo Tiejun, vice chairman of the steel association.

Benchmark iron ore futures on the Dalian Commodity Exchange had jumped 32% so far in 2021 and closed at 1,139 yuan ($175.67) per tonne on Wednesday.

($1 = 6.4838 Chinese yuan renminbi)

(Reporting by Min Zhang and Shivani Singh; editing by Jason Neely, Simon Cameron-Moore and Chizu Nomiyama)

By Min Zhang and Shivani Singh