Rising steel exports from China in July have stoked fresh concerns of a possible move to tax such shipments in the near future, sources said.
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China's finished steel exports in July rose 36% on the year to 5.669 million mt, customs data showed Aug. 7.
Higher steel exports are seen undermining China's efforts to curb steel production and cap iron ore prices amid broader plans to achieve carbon goals, according to sources.
As a result, the possible direction of steel prices in the next few months has drawn mixed reactions from the market.
Some market sources still anticipate China's steel output cuts in the second half of 2021 could boost steel prices.
However, some sources expect steel prices to trend lower in the coming months as steel demand at both home and abroad may drop equally fast.
China's total finished steel exports over January-July increased 31% on the year to 43.051 million mt, accelerating from a 30% year-on-year increase seen during the first half of 2021, according to customs data.
China's finished steel imports in July were down 16% on the month, or 60% on the year, to 1.049 million mt. Imports over January-July dropped 16% on the year to 8.397 million mt.
Net finished steel exports as a result were 4.62 million mt in July, almost tripling from the level seen a year earlier. Net exports over January-July were up 51% on the year at 34.654 million mt.
Uncertainty in demand
Some sources said overseas demand for Chinese steel will naturally decline in the second half, as operations at international steel mills gradually return to normal.
However, in order to facilitate steel output cuts in China, taxes could be imposed to minimize export volumes in the second half, sources said.
Some export traders said if hot rolled coil and plate were imposed with 10%-15% export taxes, it would be a challenge to export especially in the fourth quarter of 2021 when overseas demand is expected to taper down.
China exported 9.21 million mt of HRC and plate combined in the first half of 2021, accounting for 32% of the total finished steel exports, according to customs data.
Some sources said China's domestic steel demand has been already undermined by the country's deleveraging campaign, targeting property and infrastructure sectors, while recent COVID-19 outbreak in eastern and central China has further slowed construction activity and recovery of the consumption sector.
If steel exports were also squeezed in the coming months via high taxation, the decline in steel demand could outpace the fall in output and dent prices, a source said, adding most steel mills still plan to implement output cuts only in the fourth quarter of 2021.