July 30, 2021 – As we previously reported, the Chinese government has implemented its intention and imposed new export taxes and ended export rebates. Particularly affected are ferrochrome exports and 23 steel products, where export rebates have been completely removed. We take a look at the background and the potential impact on the world market.

Stainless Espresso: China eliminates export rebates and makes global stainless steel production more expensive
China eliminates export rebates and makes global stainless steel production more expensive

China: Global stainless steel production to become more expensive

The Chinese government announced on Thursday, July 29, 2021, that export rebates on 23 more steel products will be lifted from August 1, 2021. At the same time, it said that export taxes of 40% on ferrochrome (containing < 4% FeCr and > 4% FeCr) and 20% export taxes on pig iron will be imposed from the same date.

Steel production and carbon emissions to be significantly reduced

We had already reported several times that the Chinese government wants to concentrate domestic steel production on high-grade and greener steel products. In addition, it has already been China’s declared goal for months to significantly reduce the output volume of steel products. And to bring the constantly rising raw material prices, e.g. for iron ore, under control. These new export restrictions are just another step on China’s declared course from the current 5-year plan.

What do the adjustments mean for the global steel market?

The 23 steel products affected, whose export rebates have been completely removed, will either be absent from the world market in the future or offered at significantly higher prices. In view of the already tight availability, there is likely to be a further shortage in these product categories.

Source: chinaisa.org.cn

Ferrochrome with 40% export tax

China is considered one of the most important ferrochrome producers in the world and is also one of the largest stainless steel producers. The Asian country covers 80% of its chrome ore requirements through imports from South Africa.

Ferrochrome is an important component in various grades of stainless steel, such as 201, 304 or 430, which contain an FeCr content of around 18%.

Important stainless steel raw material in short supply worldwide

With the move to impose another 40% export tax on Ferrochrome, China will significantly increase the price and shortage of a very important raw material for stainless steel production on the global market. This should lead to an increase in Ferrochrome and stainless steel prices outside China. In return, however, this also means that stainless steel products from Chinese production can be exported more cheaply.

How will the world react on FeCr export taxes?

It remains to be seen how South Africa, for example, will react to the export taxes. As the most important chrome ore exporter in the world, with more than 14 million tons per year and its own ferrochrome smelters, this could be an incentive for the industry there to raise prices further. South Africa had already imposed an export tax on chrome ores in early 2021 to boost domestic ferrochrome production.

Facts, figures: What are prices doing on Friday?

Nickel on the LME is down slightly, which is not unusual for a Friday. Currently, it stands at $19,755 per ton. On the SHFE, nickel is up about 0.23% at $22,734 per ton. Hot-rolled coil and stainless steel futures are up sharply in Shanghai, both climbing more than 3%. Stainless steel futures are close to 20,000 Yuan (about $3,095) per ton.

Aluminum futures continue to rise

Aluminum futures on the SHFE are all pointing higher by as much as 2.66%. And aluminum values on the LME are also trending higher. Aluminum Premiums Duty paid US Midwest are also up again yesterday and are currently at $674.73 per ton.

Stainless steel spot prices up by up to $92 per tonne

Spot prices in the Chinese finished steel market are all currently up by up to 1.11%. Stainless steel spot prices are similarly up by up to $92 per ton.

Source: shfe.com.cn, lme.com, dce.com.cn

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