China to Cut Some Steel Export Taxes in 2016 Amid Worsening Glut

  • Pig iron, billets tariffs cut to 10-20% from January
  • Tariffs on rebar, coils may be reduced, Mysteel says

China will cut some steel products export tariffs next year, succumbing to pressure from worsening domestic oversupply and risking increased trade frictions as shipments surge to their highest ever from the world’s biggest producer.

China will slash export tariffs on high-purity pig iron to 10 percent and some steel billets to 20 percent on Jan. 1 , down from a temporary rate of 25 percent this year, the Ministry of Finance said Wednesday in a statement on its website. The country’s steel products exports surged 22 percent in the first 11 months to a record 101.7 million tons.

The move to ease tariffs at a time of record exports underlines China’s difficulty in reining in steel overproduction as the slowest growth in a quarter of century hits domestic demand. It also marks a sharp reversal of the government’s earlier claims that it doesn’t encourage steel exports. More exports are compounding a global surplus that will probably last for years, according to Standard & Poor’s Ratings Services.

Chinese mills, which collectively produce half of the world’s steel, will have a hard time increasing shipments next year because of softening demand and intensifying trade tensions, according to Mysteel Research. China may reduce export tariffs on the more important steel reinforcement-bar and coils, according to a report by Mysteel.

“The export volumes of high-purity pig iron or billets aren’t big and they aren’t major products,” Xu Xiangchun, chief analyst at Mysteel, said by phone from Beijing Wednesday. “Unless the government abolishes export tariffs entirely, these cosmetic changes in tax adjustments aren’t going to help the mills much.”

Net exports from China are set to contract 8 percent to 90 million tons from an estimated 98 million tons this year, Li Xinchuang, president at the China Metallurgical Industry Planning and Research Institute, said in a media briefing on Dec. 7.

— With assistance by Feiwen Rong

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