Cancellation of partial VAT rebate to undermine positions of Chinese suppliers in global market
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Cancellation of partial VAT rebate to undermine positions of Chinese suppliers in global market

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A possible removal of the partial VAT rebate on steel product exports in China may undermine positions of Chinese suppliers in the global market and allow exporters from other countries to restore their presence in the Middle East and SE Asia.

If the Chinese government abolishes that stimulus, suppliers will have to hike prices (at least by $35/t for wire rod and by up to $80/t for HDG), which will make their products less attractive in foreign markets.

In Vietnam, the main regional HRC sales outlet, importers are ready to reduce purchases of Chinese products in favour of Japanese suppliers. The current spread between prices for Chinese and Japanese products is some $45/t, whereas exporters believe that it should not exceed $30/t. “The Japanese will surely increase prices after a $45/t rise in Chinese HRC quotes [after cancellation of the VAT rebate], not too sharply though as they lack orders lately,” a large Vietnamese trader told Metal Expert.

Apart from local producer Hadeed Saudi Iron & Steel Company, Saudi importers name Egypt, Japan and Taiwan as alternative to China. Current prices for Chinese HR coils are at least $20-25/t below offers from suppliers from other countries. However, removal of the VAT rebate in China will push prices to Saudi buyers by $50/t, the point when higher-quality products from Japan or Taiwan will become more attractive in terms of pricing too.

Turkish sellers hope for weakening of Chinese presence in the Middle East and Africa, major sales outlets for Turkish longs, because Chinese exporters account for a large part of those markets due to low prices. “The VAT rebate in China may lower pressure on export markets, so Turkish mills could expand the market share. The question is how much will the Chinese presence weaken in foreign markets,” a large Turkish mills has commented to Metal Expert.

Alloyed steel exports are subject to 9% and 13% VAT rebate in China now (depending on product).

Market players generally believe that Chinese steel products will remain attractive to many buyers, though shipments will decrease significantly.

Source: World Steel News 23.10.2014


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