The rate increase concerns major steel products such as hot-rolled coil, wire rod, cold-rolled strip, hot-dipped galvanized strip and stainless steel strip.
Mixed outlook on export offers
Some market participants expect export prices to drop following the move.
A source at a northern China-based HRC producer said he expects the country’s export HRC prices to drop significantly in the next few days, especially as the market had been stuck in a lull for the past week due to buyers bidding well below sellers’ offers.
Though steel mills were asking for prices of $450-455 per tonne fob for HRC exports, a Zhejiang-based trader said his overseas customers were only bidding at $440-445 per tonne fob.
“This increase in the rebate is favorable for short-selling traders who might already have booked orders with overseas customers at the bid level,” a Shanghai-based trader said.
A Beijing-based trader said short-sellers are expected to make profits so long as steel mills cut their offers significantly.
Wire rod mills which had offered at $460 per tonne fob on Tuesday are also expected to drop their offers soon by up to a possible $10 per tonne, according to traders.
But a source at a northeastern China mill said he planned to keep his offer flat this week and wait for China’s domestic price changes before adjusting his export offers.
This is because China’s domestic steel demand and prices are rising now, and if domestic prices keep rising, steel mills may not cut export offers, sources said.
The increase in rebate may not have a large impact on export markets such as cold-rolled strip, hot-dipped galvanized strip and stainless steel strip with width below 600mm because of their small trading volumes, compared with other items such as cold-rolled coil, HDG coil and stainless steel coil/sheet with width above 600mm.
Dwindling domestic consumption
China’s move to stimulate a greater volume of exports follows a sharp rise in inventories for commodity-grade steel products
over recent months as domestic consumption has dwindled.
Chinese steel prices have risen over recent weeks while sentiment has improved in the country with the pace of new novel coronavirus (2019-nCoV) cases falling and activity increasing in key industrial sectors
. As a result of elevated Chinese steel prices, traders say they are being routinely undercut on export prices by mills selling out of South Korea and Japan.
So low have Japanese steel prices become over recent weeks, that Fastmarkets even heard of traders selling Japanese HRC into the Portuguese port of Setubal in early March.
In addition to the new measures, another China-based trader told Fastmarkets that the Chinese central government will restart and support a spate of key projects involving the steel sector including large-scale construction projects, the building of new steel mills and the upgrading of current steel mills, in order to aid steel consumption in the country.