China removed export tax rebates on boron-added steel from January 1, the country’s finance ministry vowed Wednesday.
The affected boron-added products and their tax codes are hot rolled plate and sheet 600 mm and above wide (72254091), hot rolled narrow strip (72269191), wire rod (72279010) and bars (72283010).
Exporters of these products previously enjoyed a rebate of 9-13% on the tax incurred, something that has drawn widespread criticism and trade action from rival steelmakers and steel associations in Southeast Asia, Europe and elsewhere.
Boron-added HRC, which does not have its own tax code marking it as distinct from alloy HRC, was spared from the policy change, meaning exporters continue to enjoy a 9% tax rebate on it.
In news coverage of an executive meeting of China’s State Council televised Wednesday evening, Premier Li Keqiang announced the rebate’s removal for boron-added steel, calling it “in overcapacity and polluting.”
Market participants Platts spoke to expressed surprise at Beijing?s timing, as many who?d predicted the change figured on a 1-2 month delay before introduction.
Some had thought that the authorities would need more time to formulate policy, and others pointed to the week-long Lunar New Year holidays in February as factors delaying the announcement.
Many traders Platts spoke to after the announcement said their positions would be affected, but that it was already too late for them to react to it in any effective way.
China breaks for a three-day New Year’s holiday from January 1, with this Sunday designated as a working day in lieu.
But as early as mid-December, several mills and traders had already sought to transfer their boron-added steel stocks to warehouses in the bonded areas — which would render them as having been exported, and hence skirt any tax rebate changes.
“There is a serious traffic jam now at the bonded zones and many trucks are still queuing to get unloaded,” Shanghai a trader told Platts Wednesday evening.
Yet other market participants had taken steps to prepare, with Chinese mills reaching mutual agreements with overseas re-rollers to treat any such change as a force majeure, subjecting affected contracts to renegotiation.
Boron-added steel accounts for some 40% of China?s total steel exports, a Shanghai analyst said. The rebate’s removal would affect exports short term, but would not have a lasting impact, he said.
“Steel exports will undoubtedly shrink in the first two months of 2015, but will return to normal levels when mills find ways to add other alloys, like chrome, even though costs will be a bit higher,” he said.
— Annie Li, Fu Li and Keith Tan
