I. Changes in the tariff policy of steel import and export
(1) Cancel the export tax rebate of some steel products
On April 28, 2021, the Ministry of Finance and the State Administration of Taxation issued an announcement that from May 1, 2021, the export tax rebate for some steel products will be cancelled, involving a total of 146 commodity codes; At the same time, the Tariff Commission of the State Council recently issued an announcement that from May 1, 2021, tariffs on certain steel products will be adjusted, and export tariffs on ferrosilicon, ferrochromium, high-purity pig iron and other products will be appropriately increased. 25 % Export tax rate, 20% temporary export tax rate, 15% temporary export tax rate. In 2020, my country’s steel exports amounted to 53.67 million tons, and about 65% of the products that canceled export tax rebates accounted for about 65%. From the perspective of specific varieties, the steel products that cancel export tax rebates this time are mainly low-end flat products, of which hot-rolled coils account for 19.2% of export tax rebate products were cancelled, and color-coated sheets (bands) accounted for 18.8%. Silicon steel, alloy steel galvanized sheet, width ≥600mm thickness.
Table 1 The structure of steel products for which export tax rebates have been cancelled
| No. | Category | Proportion of exports by category in 2020 (%) | Proportion of steel categories that cancel export tax rebates (%) |
| 1 | Railway Steel | 0.7 | 0.2 |
| 2 | Section Steel | 4.9 | 6.2 |
| 3 | Bar | 6.7 | 8.8 |
| 4 | Wire | 5.4 | 7.1 |
| 5 | Plate | 6.7 | 9.9 |
| 6 | Hot Rolled Coil | 12.9 | 19.2 |
| 7 | Cold Rolled Coil | 7.4 | 5.9 |
| 8 | Galvanized Plate (Strip) | 20.7 | 1.9 |
| 9 | Color Coated Plate (Strip) | 12.3 | 18.8 |
| 10 | Seamless Steel Pipe | 6.1 | 4.9 |
| 11 | Welded Steel Pipe | 6.7 | 6.4 |
| 12 | Others | / | 10.6 |
| 13 | Total | / | 100.0 |
(2) Import tariffs on some primary steel products will be zero
The adjustment of import tariffs on steel products involves 20 tariff lines, including pig iron and reduced iron, billet steel ingots, recycled iron and steel raw materials, and ferrochrome. The tariff rates have been uniformly adjusted from 1% and 2% to zero tariffs, respectively.
Table 2 Import tariff adjustment table of iron and steel products
| No. | Category | HS Code | Import Tax Rate Before Adjustment | Adjusted Import Tax Rate |
| 1 | Pig Iron | 72011000 72012000 72015000 | 1% | 0 |
| 2 | Reduced iron | 72031000 72039000 | 2% | 0 |
| 3 | Steel billet / Steel ingot | 72061000 72069000 72071100 72071200 72071900 72072000 72181000 72189100 72189900 72241000 72249010 72249090 | 2% | 0 |
| 4 | Recycled steel raw materials | 72041000 72044100 | 2% | 0 |
| 5 | Searing iron (Carbon ≤4%) | 72024900 | 1% | 0 |
II. Analysis of the impact of export tax rebate adjustments on domestic and foreign steel markets
(1) Impact on the domestic steel market
The abolition of export tax rebates for related products will increase the export cost of such products and weaken the price competitiveness in the international market. This will result in some products being exported back to the domestic market, which will help alleviate the contradiction between domestic supply and demand. In 2020, my country’s steel output was 1.325 billion tons (including repetitive materials), an increase of 7.7% year-on-year; imports of 20.23 million tons, an increase of 64.4% year-on-year; exports of 53.67 million tons, a year-on-year decrease of 16.5%; steel exports accounted for only 5.4% of domestic consumption In general, the cancellation of export tax rebates for some steel products has little impact on the domestic market. The steel products affected by the cancellation of the export tax rebate are mainly hot-rolled coils, medium-thick walls, rods and wires, and profiles. The export volume of affected varieties in 2020 will be about 35 million tons, accounting for about 65% of the total export volume.
In terms of varieties, in 2020, affected by the cancellation of export tax rebates, the export volume of coated sheets will account for 55% of the domestic market, seamless steel pipes and hot-rolled coils will account for 7% and 6% respectively, and other affected export varieties will account for the domestic market. The proportion of market share did not exceed 5%, and the impact on the domestic market was limited. The actual output of coated sheets is about 18 million tons, and the export volume in 2020 will be 6.58 million tons. More than one-third of the coated sheets rely on exports. The cancellation of the export tax rebate will have a huge impact on the export of coated sheets, resulting in some products. Returning to China will have an impact on the domestic market; the domestic market for seamless steel pipe products, medium-diameter pipes, seamless pipes and stainless steel pipes, will have an impact; for hot-rolled coil products, the domestic market for hot-rolled alloy steel coils and stainless steel narrow strips with width ≥600mm Will be affected to a certain extent; in addition, the cancellation of export tax rebates for some small types of steel products such as steel sheet piles, steel wires, pipe fittings and other products will have an impact on the domestic market structure of subdivided products and cause price fluctuations.
Table 3 The proportion of the export volume of the canceled tax refund products in the domestic market share in 2020
| No. | Category | Proportion % |
| 1 | Railway Steel | 2 |
| 2 | Section Steel | 3 |
| 3 | Bar | 5 |
| 4 | Wire | 2 |
| 5 | Plate | 4 |
| 6 | Hot Rolled Coil | 6 |
| 7 | Cold Rolled Coil | 3 |
| 8 | Galvanized Plate (Strip) | 2 |
| 9 | Color Coated Plate (Strip) | 55 |
| 10 | Seamless Steel Pipe | 7 |
| 11 | Welded Steel Pipe | 4 |
(2) Impact on the international steel market
In terms of varieties, the export volume of six categories of products, such as profiles, bars, wires, medium and heavy plates, hot-rolled coils, and color-coated plates (strips), will be affected by the abolition of tax rebates, accounting for more than 80% of the export volume of each variety in 2020 , Especially medium and heavy plates, hot-rolled coils and color-coated plates (strips) accounted for more than 90%. China’s medium and heavy plates, hot-rolled coils, and color-coated plates (strips) are mainly exported to South Korea, Vietnam, the Philippines, and Pakistan , Thailand and other countries, after the cancellation of the export tax rebate policy takes effect, the competitiveness of China’s steel exports will be weakened, and some products will have a greater impact. Most countries with a weak iron and steel industry foundation (except South Korea) rely on imports, which may further increase the contradiction between supply and demand for such products in related countries.
Table 4 The export volume of varieties affected by the cancellation of the tax rebate accounted for the proportion of the export volume of each variety in 2020
| No. | Category | Proportion % |
| 1 | Railway Steel | 21 |
| 2 | Section Steel | 82 |
| 3 | Bar | 86 |
| 4 | Wire | 86 |
| 5 | Plate | 96 |
| 6 | Hot Rolled Coil | 97 |
| 7 | Cold Rolled Coil | 52 |
| 8 | Galvanized Plate (Strip) | 6 |
| 9 | Color Coated Plate (Strip) | 100 |
| 10 | Seamless Steel Pipe | 52 |
| 11 | Welded Steel Pipe | 62 |
III. The impact of import tariff adjustments on the domestic raw material market
In 2020, my country’s imports of pig iron, reduced iron, and billet steel ingots have all achieved substantial growth. Among them, the imports of billet steel ingots and pig iron reached 18.39 million tons and 5.68 million tons respectively, a year-on-year increase of 492.3% and 419.9% respectively. Reduced iron imports 3.46 million tons, an increase of 153.4%. In the first quarter of 2021, my country’s steel billet, steel ingot and pig iron imports once again achieved substantial growth, with imports of 2.37 million tons and 960,000 tons, an increase of 35.4% and 21.7% year-on-year respectively; after the lifting of restrictions on the import of recycled steel raw materials, the import volume was 22,000 tons , Almost all have reached the full-year import volume of 2020, a sharp increase of 566.2% year-on-year. But on the whole, the total import volume of relevant primary steel products is still relatively small, failing to have much impact on the domestic steel raw material structure. After the implementation of zero tariffs on imported steel raw materials, the import volume is expected to continue the current momentum of substantial growth, which will further promote the substitution of some imported iron ore, restrain the rapid rise of iron ore prices, and enhance the ability to guarantee resources.
IV. Analysis of the impact on steel prices at home and abroad
(1) Impact on domestic steel prices
Recently, domestic and international steel prices have continued to rise, and general steel products such as rebar and hot-rolled coils in a wide range of products have also reached staged highs. This has led to a sharp rise in the cost of some downstream industries and increased operating pressure. This tax policy adjustment was introduced in the context of the national carbon peak and carbon neutral target requirements and the continuous increase in the prices of domestic and foreign steel products and main raw materials. It is intended to reduce the export of ordinary steel products and expand the import of primary processed products, thereby reducing Domestic crude steel output promotes a higher level of supply-demand balance in the steel market and restrains the continued upward trend of domestic and foreign bulk commodities. This tariff policy adjustment will ease the contradiction between supply and demand in the domestic steel market, help curb the rapid rise in steel prices under the expectation of production restrictions, and promote the stability of steel prices. This is positive for maintaining the stable development of the steel industry, the steel industry chain, and even the economy. effect. However, on the one hand, the market had anticipated the adjustment of my country’s export tariff policy. Before the policy was formally introduced, most of the export steel products had already started quoting in accordance with the cancellation of tax rebates; on the other hand, the market had expectations of the country’s policy of reducing crude steel production. With the increase, the expectations of environmental protection and production reduction in some regions have not changed. Driven by strong domestic demand, the supply and demand relationship in the steel market will not undergo fundamental changes in the short term. Overall, the new policy will have limited impact on steel prices in the short term.
(2) Impact on international steel prices
The abolition of export tax rebates for related products will increase the export costs of relevant export companies. Only by raising the export quotation of steel can gains be made. This will weaken the price competitiveness of related products in the international market, and export of some products will be transferred back to the domestic market. However, the current domestic and international price difference is relatively large. Recently, the mainstream quotation of China’s hot coils, which steel mills fully bear the risk of tax rebate changes, has reached US$930 to US$950 (FOB). In the short term, the impact on international steel prices will not be significant, but the mid- to long-term impact depends on the domestic and international price difference and overseas demand.
V. Suggested Measures
1. Automatically adjust the export structure in response to new changes.
The new steel import and export policy orientation has been very clear, showing the country’s determination to control production and adjust the structure. Iron and steel companies should adapt to policy changes, actively adjust the export structure, stabilize the export of high value-added, high-tech steel products, and reduce high energy consumption. , The export of high-polluting general steel products; at the same time, strengthen the analysis and judgment of the international steel market demand, optimize the regional structure of exports, and avoid the implementation of the new policy to have a major impact on the company’s steel exports and operating benefits.
2. Grasp the new opportunity to optimize the raw material import structure
This adjustment of import and export tariffs will definitely help promote the import of pig iron and reduced iron, billet steel ingots, recycled iron and steel raw materials and ferrochrome. Iron and steel companies should seize the opportunity to actively study the adjustment of imported raw materials structure and explore the construction of overseas primary product processing bases. , To reduce the dependence on overseas iron ore resources through the adjustment of raw material structure, and then to stabilize the increase in raw material costs caused by the rising iron ore prices. At the same time, it is recommended to make pre-plans to guide the import of primary products in an orderly manner, so as to avoid swarms of imports leading to large fluctuations in domestic market prices, which will have an impact on the steady development of the domestic steel industry.
3. Plan a low-carbon development strategy in the face of the new situation.
The adjustment of steel import and export tariffs objectively reflects the country’s determination to implement the goal of carbon neutrality in key industries. To help reduce carbon emissions, relevant industries in developed countries such as Europe, the United States, South Korea, Japan, and other regions have put forward carbon footprint certification requirements for upstream suppliers. The EU’s upcoming carbon border adjustment mechanism will cover all imported products and commodities covered by the EU’s emissions trading system, which means that carbon tariffs will be imposed on imported products in the future. Regardless of whether it is from the domestic low-carbon development requirements or from the perspective of steel exports, steel companies must strengthen top-level design and actively plan low-carbon development strategies to ensure that they maintain strong domestic and foreign market competitiveness under the background of future low-carbon development.
