China pushes domestic production with duty tweak

China has removed Value Added Tax (VAT) rebates on exports of 146 steel products effective May 1, a move that was being widely anticipated.

Country’s Finance Ministry, in a separate announcement, slashed the import duty on pig iron, crude steel and ferrous scrap– to zero.

Starting on May 1, China will apply a provisional zero import tax rate on pig iron, crude steel, recycled steel raw materials, and ferrochrome, the Customs Tariff Commission of the State Council said in a circular.

Export tariffs on ferrosilicon, ferrochrome, and high-purity pig iron would be raised to 25 percent, 20 percent, and 15 percent, respectively.

The adjustment is aimed at reducing import costs, expanding steel imports, supporting domestic producers to cut crude steel output, guiding the industry to cut energy consumption, and pushing industrial upgrading and high-quality development in the sector, according to the circular.

“The move comes as China is intensifying efforts to transform the energy-consuming steel industry for greener and high-quality growth. The country plans to cut crude steel output to ensure it falls year on year in 2021,” Chinese state agency said.

China previously announced that it would strive to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060.

While removal of the VAT rebates will discourage exports helping cooling down domestic prices, it will also help other steel producers like India to raise their exports.

The products that would be impacted include hot rolled coil (HRC), wire rod and re-bar as well as cold rolled and galvanized sheets.

Slashing import duty on pig iron, crude steel and ferrous scrap to zero will reduce the cost of importing, expand the import of iron and steel resources and lend downward pressure on domestic crude steel output, sources said.