(ATF) China suspended some import taxes on steel products on Wednesday as part of a multi-year campaign to use market pressure to force Chinese producers to shrink and become more energy efficient and profitable.
Duties on crude steel, pig iron, recycled steel and some other products will be exempted temporarily starting May 1, the Customs Tariff Commission under the Ministry of Finance said in a statement.
And tariffs on exports of ferro-silicon, ferro-chromium, and high-purity pig iron will be raised temporarily to rates of 25%, 20%, and 15%, respectively.
The change will reduce import costs, drive the domestic output of crude steel to shrink, curb steel industry energy consumption, and promote the “transformation and upgrade of the steel industry” and its “high-quality development”.
In a separate statement, the Finance Ministry's Tax Administration Commission said that tax reimbursement for 146 types of steel products – originally 13% of their prices - will be eliminated. Steel products with high “added values”, such as those used for automobiles, home electronics, and railway, will continue to enjoy tax reimbursement.
Steel products with tax reimbursement eliminated account for almost 70% of China’s steel exports, according to an analysis by Ping An Securities.
“The intention of the policy change is to reduce the export of general steel products so that they can be used in the domestic market, while continue to encourage the exports of high added-value products… We expect the change to help put downward pressure on the soaring steel price in China, and help stabilise the development of related industries,” Li Jun, an analyst from Ping An Securities, said.
'Move will cut consumption and cool prices'
Speaking of the import tariff cuts on crude steel and recycled steel products, Li said the change will help reduce China’s consumption of iron ore and help curb its price increase.
China imported 283 million tonnes of iron ore in the first quarter, up 8% from a year earlier, according to data from China Iron and Steel Association. The price of the iron ore though, surged 64.5% year over year to $150.79 per tonne.
It is of significant importance for China to reduce its reliance on iron ore imports, both from near- and long-term perspectives, Li added.
China produces about half the world’s steel but a slowdown in demand as an economic boom cooled after 2008 left excess production capacity and led to price-cutting wars, a surge in exports and heavy financial losses.
The United States and Europe complained China was selling at improperly low prices, hurting foreign competitors.
Regulators say they want to use market forces instead of government orders to force less efficient mills to close. They stepped up environmental enforcement while state-owned industry leaders were encouraged to merge and build more efficient mills.
More than 150 million tonnes of production capacity was eliminated between 2016 and last year, according to the government.
Despite that, total Chinese output rose 5.2% last year over 2019 to just over 1 billion tonnes, according to government data.