[BEIJING] China will cut export taxes on steel billet and pig iron from the start of 2016, the finance ministry said on Wednesday, the latest move by the world's top steel producer to erode a domestic glut and offer a lifeline to the stricken industry.
Exports of the two products are relatively modest, but the move will likely fuel concerns that the world's biggest consumer of industrial raw materials is exporting its excess output to a saturated global market, accelerating a price rout. "This kind of strategy is aimed at redirecting this oversupply in China to other countries," said Helen Lau, analyst with Argonaut Securities in Hong Kong.
As part of a raft of measures aimed at boosting economic growth in the world's second-largest economy, the ministry said it will cut the 25 per cent export tariff on billet and pig iron to 20 per cent and 10 per cent respectively from Jan. 1.
The move underscores the deepening crisis in the world's biggest steel industry as the country's economic growth slows, leaving stricken mills to struggle with plunging prices, waning demand from real estate to shipbuilding, and tight credit. Many have gone bankrupt or cut output.
Chinese steel mills have cut shipments of both products since 2008 when duties were raised to current levels. In January-October, China exported 141,659 tonnes of pig iron and 5,367 tonnes of steel billet, said Kevin Bai, analyst at CRU in Beijing.
Preliminary customs data on Tuesday showed China's shipments of steel products topped 100 million tonnes for the first time in the first 11 months of the year.
Two exporters in China said the tariff cut was too small to help boost exports, but it will likely escalate trade tensions with Europe and the United States, which have accused the country's mills of deliberately dumping surplus production.
Market participants were surprised by the move, coming just weeks after authorities hit back at criticism from abroad about its support for the industry and saying Beijing did not set out to encourage steel firms to boost exports.
As part of Wednesday's statement, the government said it would also eliminate export tariffs on phosphoric acid and ammonia and cut taxes on some energy raw materials, but it did not identify which materials would be subject to the cut.
It kept tariffs on naphtha, jet kerosene, diesel, fuel oil, ethylene/propylene, propane and benzene unchanged. It also kept base metals and nickel pig iron tariffs unchanged.