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Removal of Chinese export tax rebates seen to uplift steel import prices to Europe, Mideast


European imports likely to see uptick after summer

Processors will need to pass on costs on higher imports

  • Author
  • Laura Varriale    Staff
  • Editor
  • Haripriya Banerjee
  • Commodity
  • Metals

Steel import prices in the Europe, Middle East and Africa region could see an uplift following removal of value added tax rebates on Chinese exports of cold-rolled and coated steel from Aug. 1, market participants told S&P Global Platts July 29.

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As Chinese export volumes are expected to be limited due to the rebate cancellation, market participants expect suppliers of higher priced products from other regions to compete on an international level, with a knock-on effect on what will be offered in Europe and the Middle East. The removal of the 13% VAT rebate on cold-rolled coil, or CRC, and coated steel products was widely anticipated by the market since May.

Imports of cold-rolled and certain coated steel grades from China into the EU have been minimal for several years due to the application of antidumping duties, but the products have been competing on international markets.

An Italian trader said: "If it is canceled it will boost import prices even more in September."

Meanwhile, capacity reduction in steel production in China is expected to lift prices further.

"I think CRC from the Far East such as South Korea and Japan, will remain necessary for European customers. On the VAT, the impact could be strong on galvanized not passivate material," an Italian service center source said.

"Most of the feeds for our mill are coming from China so we are going to be severely impacted," said a Middle East-based coated coil producer which processes Chinese CRC.

"Some orders are already booked, so not sure if the customers are going to accept the higher levels. According to the terms of our agreement with the Chinese mills, we are already obliged to cover this cost. This will impact steel prices at the global level as China is a major steel producer," the coated coil producer said.

A Turkish coated coil producer said that it will have an effect on their exports into EU and is likely to boost offers to the region.

"This month could be quiet due to the summer holidays. However, we are expecting a notable recovery in EU demand as of September. Only the European Commission's ongoing dumping investigation against hot-dipped galvanized steel imports from Turkey could be a problem," said the Turkish producer.

The EC announced June 24 it has opened an investigation into HDG coil imports from Turkey and Russia, alleging imports of certain corrosion-resistant steels originating from these countries were being dumped.

Changing trade flows

ArcelorMittal CEO Aditya Mittal on July 29 highlighted the importance of Chinese tax policy on sustainability and stability of the global steel sector, in a scenario where steel prices are expected to continue to rise in all segments.

In calls with reporters and analysts, Mittal noted that as regards world steel trade, the role of China -- over the past decade a major exporter -- is changing. China's first-half and expected August removals of export tax rebates on certain products means it is no longer incentivizing steel exports.

"There's a shift in the approach of the Chinese steel industry in how much the industry should export ... our belief is that it's also driven by the decarbonization discussion we're all having, because now there's less incentive to create carbon emissions in China and then export the steel," he said.

According to Platts European import assessments for flat steel, import prices started to decrease over the past two months with the daily hot-rolled coil import assessment at Eur1,000/mt CIF Antwerp on July 29 -- down Eur90/mt since the beginning of June.

A 15%, or minimum of $115/mt, export duty will apply from August on Russian steel exports as well, which will change international trade flows further.