Cancel export tax rebate dragged down the second quarter steel trend

When rumors finally became reality, people's feelings changed from a heavy one to a relatively easy one. Blue Whale Steel Studio believes that this ease is due to the difficulty of determining the trend of the steel market in the second and second quarters. On April 9, the Ministry of Finance and the State Administration of Taxation “Circular on Adjusting the Export Tax Rebate Rate of Steel Products” (Cai Shui [2007] No. 64) was formally promulgated, although this move will definitely make the United States, the European Union, and Southeast Asia’s major and cheaper regions. Chinese steel producers are satisfied with the impact, but for domestic steel mills, the introduction of the policy of canceling export tax rebates at the moment is not a blow to the domestic steel market in the second quarter.

First, due to the fact that the domestic steel market has a tendency to make early and insufficient stamina in the first quarter of this year, the blue whale steel studio expects that the trend of steel price increase in the second quarter will lack sufficient thrust.

1, two months before the first quarter, North China wire rod, rebar and plate prices were cumulative increase of 280 yuan / ton, 220 yuan / ton and 450 yuan / ton, the price of 350 yuan higher than the same period last year prices / Tons, 460 yuan/ton and 800 yuan/ton. In March, steel prices oscillated steadily. Although there was no significant rise or fall, overall market prices showed a slightly lower trend than at the end of February. As of the end of March, the prices of wire rods, steel bars, and plates in North China were higher than those at the end of February. The declines were 50 yuan/ton, 10 yuan/ton and 70 yuan/ton respectively.

2. Actually, not only in North China, but also in East China and South China. The price of wire, steel, and plate in East China at the end of March decreased by 60 yuan/ton and 50 yuan respectively from the end of February. / Tons and RMB 20/tonne; East China wire rod, rebar, and plate prices fell by RMB 10/t, RMB 20/t, and RMB 60/t respectively from the end of February.

The early start of the steel market undoubtedly drastically increased the inventory costs of circulation companies. In the case of slow start of demand (although inventory has been reduced, but the overall level is still high), steel prices, especially long steel prices, may continue to rise. Difficulties, and at this time the introduction of the policy of canceling export tax rebates, Blue Whale Steel Studio believes that the market sentiment is again a small blow.

Second, the rapid growth of steel import and export, on the one hand, allows steel mills and circulation companies to share the profits brought about by the high prices in the international market, while also increasing the dependence of domestic steel mills on diversion channels for international market resources.

1. Since the beginning of this year, the enthusiasm of domestic steel mills for exporting steel products has increased. Exports have increasingly become an indispensable diversion channel for domestic resources. According to relevant statistics, domestic steel exports in March this month reached 5.38 million tons, and exported more than 1 million tons of steel in February, an increase of 22.8% from the previous month, an increase of 91% from the same period last year; exports of 660,000 tons of steel billets, month-on-month The export volume was 120,000 tons, an increase of 22.2% from the previous period, an increase of 116% year-on-year.

2. In the first quarter of the year, total domestic steel exports reached 14.02 million tons, an increase of 117% year-on-year, and 1.77 million tons of steel billets were exported, an increase of 97% year-on-year. If it is assumed that the annual export maintains the speed of the first quarter, then according to the export schedule, the estimated annual export steel quantity will reach 56 million tons, and the number of export steel billets will reach 7.08 million tons, and the total export volume will reach 63 million tons, which is more than the total amount in 2007. The estimated annual increase in total domestic crude steel is approximately 10 million tons.

The huge increase in export steel products has eased the pressure on domestic resources, but it has also gradually strengthened the reliance of domestic steel mills on the international market. Currently, domestic steel mills that produce raw materials generally implement a limited “blue sea strategy”, that is, whether Profitability to make decisions on export steel quantity. In the upsurge of the international market, when the export efficiency of steel products is higher than that of the domestic market, although steel mills have truly incorporated the international market into their own marketing systems, they lack the ability to manipulate the international market. The steel mills have to switch to domestic sales when the global market goes down, especially when the export steel efficiency is obviously not economical compared with domestic sales, and it may eventually cause the domestic market price to further decline.

Third, the state's various regulatory policies have been issued in succession, but it is difficult to see good news for exporting steel products.

1. In terms of credit policy, on March 17, the central bank decided to increase the benchmark deposit and lending rates of financial institutions by 0.27 percentage points. This is the third time since the central bank raised the deposit reserve ratio in the first quarter and raised interest rates for the third time since 2006. The tightening monetary policy stems from the rapid increase in credit supply in the first two months of this year, which has exceeded the central bank’s expectations. In January, the balance of RMB loans was 23.1 trillion yuan, an increase of 16% year-on-year, and the rate of increase was 2.2 percentage points higher than the same period of last year. In February, the balance of RMB loans was 23.5 trillion yuan, an increase of 17.2% year-on-year. The increase was faster than that in January. 1.2 percentage points. The central bank increased the financing cost of investment behavior by raising the benchmark interest rate.

2. On the aspect of taxation policy, on April 9, the Ministry of Finance and the State Administration of Taxation, Circular on Adjusting the Tax Refund Rate for Steel Products (Cai Shui [2007] No. 64) was formally promulgated, stipulating that since April 15, 2007, in addition to retaining certain specialties stainless steel sheet and plate, cold rolled products export rebate rate dropped to 5%, other products comprising a long and hot-rolled steel to 83 tariff lines canceled export tax rebates. For steel mills, the export profit of long products at the beginning of April is about RMB 300-400/ton. If the tax refund is cancelled, the export profit will be lost and the export efficiency will be lower than that of domestic sales. The export of steel has become uneconomical.

3. In terms of environmental protection policies, raw material prices have continued to rise, and steel mills' profits have been continuously squeezed. China's coal industry sustainable development policy measures pilot work started in Shanxi on April 2nd. In 2007, the standard for collecting sustainable development funds per ton of coal was 14-20 yuan. In addition, a deposit for mining and ecological environment restoration and recovery was also extracted at the rate of RMB 10 per ton. According to the standard of RMB 5 per ton, coal mine conversion and development funds will be collected. Shanxi Coking Coal Group has raised the price of externally supplied coke in April to offset the impact of this part of the policy. Affected by this, market prices for pig iron, scrap steel, and smelted alloy materials in North China continue to rise.

4. In terms of exchange rate policy, the continuous appreciation of the renminbi against the US dollar has now reached the threshold of 7.73. Although the impact on the export steel products has been limited, when steel profits of exports have become thin and light, steel mills will inevitably start small profits. Preoccupied with" up.

The country’s export tax rebate policy for long steel and other steel products has a minor impact on the export strategy of steel mills in a situation where the international market is at a high level, but this policy will be a drag on the market trend in the domestic market in the second quarter. One of the factors of the domestic steel market in the second quarter. (【Blue Whale Steel Studio】)
2007-4-11

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