On March 25, the State Council decided to increase the export tax rebate rate for steel products from April 1. Industry insiders pointed out that raising the export tax rebate rate for steel products may reverse export expectations and enable steel companies to export more surplus inventory to foreign markets. However, most analysts believe that as the steel industry maintains a pattern of oversupply, it is difficult to start the rebound of steel prices.
More benefits from wire rods Previously, China Steel Association surveyed 25 large and medium-sized major export enterprises. In January, about 60% of steel exports were carried forward last year. It is expected that steel exports will decline by more than 80% in 2009. This has caused a sharp increase in the pressure on the domestic market.
Mainland Futures Analyst Sun Zhibiao said in an interview with reporters: “Demand in foreign markets is sluggish, which has caused great pressure on the domestic market. Starting from the beginning of last year, steel mills that had stopped production last year started one after another, and the current rate of return has reached 70%. Recovery of output, declining external demand, domestic demand remains weak, and pressure on stocks of course rises. The export tax rebate rate relieves this pressure to a certain extent.†In terms of export volume, wire rod companies have benefited even more. From 2004 to 2007, the export volume of rebar accounts for about 9% of total steel exports. Wire exports account for a slightly higher share of total steel exports, above 10%.
At present, domestic steel market prices are generally higher than those of major export destinations such as Korea, the European Union and the United States, and steel prices have lacked a competitive advantage in the international market. Liu Zheng, a seafarer futures analyst, said: “Improve the export tax rebate rate for steel products is good for companies, can reduce costs and find export advantages.â€
The demand is slightly warmer Analysts unanimously believe that the increase in the export tax rebate rate will not solve all the problems, mainly to observe whether the demand in the foreign market has picked up. Sun Zhixi also pointed out: "Inflation expectations caused by the recently announced US economic policy have some stimulus to the economy, but it is still not certain how long this warming can last."
Liu Hao believes that China's construction steel exports are not many, export tax rebates may have little effect on rebar and wire rods. From the data point of view, the import and export volume of rebar is very small. This is due to the fact that China is at an important stage of urbanization and has a greater need for steel for building materials.
Concerned about iron ore negotiations Liu Xin believes that there is still great uncertainty in the second quarter of steel prices. He stressed: "The most uncertain factor is the raw material price of steel. Because rebar and wire rod are relatively low-end steel products and have relatively small technological content, they are greatly affected by raw material prices."
In early March, Baosteel had already lowered the price of its products in April. Angang also followed a substantial reduction in the ex-factory price of its products in April. The price cuts for each product ranged from RMB 300 to RMB 550/ton. Sun Zhiyi expects that this expectation has reduced the scale of steel mills to return to work, and that limiting production will boost prices. The rise in prices will again stimulate steel mills to return to work. Resumption of work will hit steel prices, and steel companies will go to stocks if demand does not improve significantly. The process of transformation will be long and painful.
More benefits from wire rods Previously, China Steel Association surveyed 25 large and medium-sized major export enterprises. In January, about 60% of steel exports were carried forward last year. It is expected that steel exports will decline by more than 80% in 2009. This has caused a sharp increase in the pressure on the domestic market.
Mainland Futures Analyst Sun Zhibiao said in an interview with reporters: “Demand in foreign markets is sluggish, which has caused great pressure on the domestic market. Starting from the beginning of last year, steel mills that had stopped production last year started one after another, and the current rate of return has reached 70%. Recovery of output, declining external demand, domestic demand remains weak, and pressure on stocks of course rises. The export tax rebate rate relieves this pressure to a certain extent.†In terms of export volume, wire rod companies have benefited even more. From 2004 to 2007, the export volume of rebar accounts for about 9% of total steel exports. Wire exports account for a slightly higher share of total steel exports, above 10%.
At present, domestic steel market prices are generally higher than those of major export destinations such as Korea, the European Union and the United States, and steel prices have lacked a competitive advantage in the international market. Liu Zheng, a seafarer futures analyst, said: “Improve the export tax rebate rate for steel products is good for companies, can reduce costs and find export advantages.â€
The demand is slightly warmer Analysts unanimously believe that the increase in the export tax rebate rate will not solve all the problems, mainly to observe whether the demand in the foreign market has picked up. Sun Zhixi also pointed out: "Inflation expectations caused by the recently announced US economic policy have some stimulus to the economy, but it is still not certain how long this warming can last."
Liu Hao believes that China's construction steel exports are not many, export tax rebates may have little effect on rebar and wire rods. From the data point of view, the import and export volume of rebar is very small. This is due to the fact that China is at an important stage of urbanization and has a greater need for steel for building materials.
Concerned about iron ore negotiations Liu Xin believes that there is still great uncertainty in the second quarter of steel prices. He stressed: "The most uncertain factor is the raw material price of steel. Because rebar and wire rod are relatively low-end steel products and have relatively small technological content, they are greatly affected by raw material prices."
In early March, Baosteel had already lowered the price of its products in April. Angang also followed a substantial reduction in the ex-factory price of its products in April. The price cuts for each product ranged from RMB 300 to RMB 550/ton. Sun Zhiyi expects that this expectation has reduced the scale of steel mills to return to work, and that limiting production will boost prices. The rise in prices will again stimulate steel mills to return to work. Resumption of work will hit steel prices, and steel companies will go to stocks if demand does not improve significantly. The process of transformation will be long and painful.
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