Heavy! The new version of the steel import and export policy will be officially implemented after May 1

On April 28, the Ministry of Finance and the State Administration of Taxation announced the cancellation of the export tax rebate for some steel products from May 1, 2021. The market has long awaited this policy. As early as March, there was market news that the country would adjust export tax rebates. In March 2020, in order to cope with the possible adverse effects of the epidemic on the export market, the State Administration of Taxation and the Ministry of Finance jointly issued an announcement to increase the export tax rebate rate of 1,464 products, and the tax department will facilitate the declaration of export enterprises and speed up the processing of export tax rebates. A series of facilitation measures have been introduced from the perspective of the People’s Republic of China to ensure that “tax reductions and excellent services help resumption of production and development” are implemented.

The export tax rebate policy rumored in the market will be cancelled. There are three kinds of speculations in the market (take hot-rolled coil products as an example)1:

1. Cancel the 13% export tax rebate: This policy will lead to a sharp increase in the export price of domestic hot coils, and a sharp drop in the export price-performance ratio, which will affect the export of sheet products. Every month, about 600,000 tons of hot-rolled resources are transferred from export to domestic sales, which will put a certain pressure on the domestic hot-rolled market in the short term, put a certain pressure on the price of hot-rolled coils, and have a greater impact on the domestic market.

2. The 13% export tax rebate is adjusted to 9%: it means that the export price of domestic hot-rolled coil resources will increase to a certain extent. Taking the current hot-rolled coil resources in Shanghai as an example of 5740 yuan/ton, it means that every ton of exports The hot-rolled coils will be 229 yuan/ton more expensive than the previous period, which will greatly weaken the competitiveness of my country's hot-rolled coils in overseas markets.

3. If the export tax rebate policy is cancelled in the later period, it is not implemented. The increase in exports will become a major boost to domestic hot-rolled coil consumption, which will help the price of hot-rolled coils continue to rise.

Policy impact analysis and impact assessment

Judging from the products involved in the list, the products involved cover 146 tariff codes such as hot-rolled coils, cold-rolled coils, color-coated coils, galvanized coils, stainless steel, wire rods, and steel pipes among finished steel products. On the whole, the product coverage and cancellation efforts of this tax rate adjustment are stronger than previous expectations. Before this adjustment, there are 166 steel export tax codes that can enjoy the export tax rebate policy. Among the hot-rolled products, except for steel rails, wheels, and axles, the export tax rebate will be cancelled. The products that retain the export tax rebate include cold-rolled alloy steel plates, cold Rolling ordinary medium-thick and wide steel strip, cold-rolled thin and wide steel strip, electro-galvanized sheet, hot-dip galvanized sheet, tin-plated sheet, galvanized sheet, electrical steel, etc.

According to the calculation of the export data released by the customs, in the first quarter of 2021, the steel products with export tax rebates reserved for export totaled 4.29 million tons, accounting for 24.3% of the total exports; the steel exports for which the steel export tax rebates were cancelled were 13.378 million tons, accounting for 75.7% of the total exports. .

Export tax rebates have a more obvious impact on export costs, affecting the export profits of domestic exporters, but will not affect the demand in the international market. From the perspective of export, the main reason affecting exports comes from overseas demand and domestic and foreign price differences. At present, the mainstream price of China's hot coil has reached 930-950 US dollars (FOB), and there is still a huge price difference with the domestic spot market, which is attractive to foreign markets. The force still exists.

Policy reasons and extended thinking

From the perspective of national policy orientation, in the context of carbon neutrality, it is necessary to ensure a decline in crude steel production in 2021, and the export policy orientation does not encourage the import of general carbon steel. At the first quarter of 2021 information conference held by the China Iron and Steel Association in Beijing on April 27, Luo Tiejun, vice chairman of the China Iron and Steel Association, pointed out in response to the reporter’s export tax rebate policy that “The Iron and Steel Association has been calling for it, and I hope the country will continue to encourage The export of advanced steel products such as high value-added and high-tech content. China’s exports of steel products must be high-quality and needed by the world, establishing a high-quality reputation for China’s steel products. In terms of encouraging the import of primary steel products, it is recommended to moderately adjust primary steel products “Import tariffs of the United States will facilitate the import of recycled steel raw materials, thereby effectively increasing the supply channels of iron elements. The industry hopes that the country will introduce export tax adjustment policies as soon as possible”.

On the same day, the Ministry of Finance website also released another message, “In order to better ensure the supply of steel resources and promote the high-quality development of the steel industry, with the approval of the State Council, the State Council’s Tariff and Tariff Commission recently issued an announcement and will be adjusted from May 1, 2021. Tariffs on some iron and steel products. Among them, zero import tariffs are imposed on pig iron, crude steel, recycled steel raw materials, ferrochrome and other products; the export tariffs on ferrosilicon, ferrochrome, high-purity pig iron and other products will be appropriately increased, and they will be implemented after adjustment. % Export tax rate, 20% temporary export tax rate, 15% temporary export tax rate."

In other words, this time the country not only adjusted the export tax rebate policy, but also raised the export tariffs of some products, involving three products: ferrosilicon, ferrochrome, and high-purity pig iron, all of which belong to steel smelting. The domestic supply of basic intermediate raw materials is in a tight state. In addition, a zero import temporary tax rate is imposed on pig iron, crude steel, recycled steel raw materials, ferrochromium and other products. In addition, there is an intention to suppress the increase in iron ore prices.

Will this policy constitute a negative for the steel market?

Obviously, the abolition of the export tax rebate policy will curb the profits of exporters, but considerable profits can still be obtained through a premium, and the total amount of profits depends on the quantity of exports. It is necessary but not sufficient to judge that the export market demand will decrease based on the abolition of export tax rebates. From January to March, my country's steel exports increased by 23.8% year-on-year and 3.8% year-on-year. Excluding the adverse impact of the epidemic on exports, the export market will only return to normal levels in 2021.

The real factor affecting domestic steel prices is still the contradiction between domestic supply and demand. Obviously, the current domestic market demand has not seen a significant decline, and the demand for steel in major industries such as automobiles, home appliances, ships, and real estate is at a historically high level during the same period. On the supply side, the production limit policy in the context of carbon neutrality and the strictest environmental protection policy in the history of the Tangshan region have had a great impact on the future supply of steel. This is the core logic of price increases.

In April, the price of steel rose rapidly. The price of steel was facing the four high levels of high price, high inventory, high profit and high start, and the futures discounts. These fundamental conditions point to the possibility of adjustment of steel prices. Coming soon. The future price trend depends on the market’s expectations of bad news. It does not rule out the possibility that the export tax rebate policy will become one of the hot spots of speculation. Defensive measures are necessary, and excessive speculation is not wise.