Call for tax rebates to boost steel industry

China should adopt more generous export tax rebates for steel products to bolster the industry, where losses are worsening due to overproduction and sluggish domestic demand, a senior industry executive said.

China's rebate policy needs quick and sweeping adjustments to stabilise domestic prices and maintain competitiveness, Luo Bingsheng, Deputy Head of the China Iron and Steel Association, was quoted as saying in the official Shanghai Securities News yesterday.

China has increased export tax rebates several times this year, most recently on March 27, improving access to the overseas market for some steel and stainless steel products as well as thousands of other categories of goods.

But China, the world's largest steel-making nation, has already encountered friction with its trading partners over its steel export tax rebates, including an anti-dumping investigation over steel pipe imports in the United States.

The collapse in export demand cut China's shipments of steel products to the rest of the world by 60 per cent in the first four months of the year and left China in an unusual position – as a net importer of steel products – in March and April.

Luo said losses at 72 large and mid-sized Chinese steelmakers in the first four months of this year reached 5.18 billion yuan (Dh3.12bn), compared with 63.40 billion yuan in profit last year.

Figures also showed losses worsening month by month, to 1.87 billion yuan in April. Luo blamed production increases at small steel mills for worsening an oversupply situation in the domestic market, triggering a tumble in prices. A Ministry of Commerce official said last month there was room for China to increase tax rebates for exporters, including steel manufacturers.

Export tax rebates were cited as a factor behind a dumping complaint last month by US steelmakers and the steelworkers' union against Chinese makers of welded and stainless steel pipes used for oil and gas drilling. The US International Trade Commission voted unanimously on Friday to approve an anti-dumping probe that could lead to steep duties against the steel pipe products. A preliminary ruling on countervailing duties is due in early July.

The steel sector's call for more rebates echoes a similar demand from the nonferrous metals lobby, which wants the full 17 per cent rebate on exports of aluminium products to help smelters. Like steel, the aluminium sector is in danger of oversupply.

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