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China: Export offers dwindle, mills await clarity on export tax

Very few offers are emerging from Chinese mills at present across categories like HRCs, plates, wire rods etc. SteelMint understands that most offers are conditional, in ...

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17 Jun 2021, 09:07 IST
China: Export offers dwindle, mills await clarity on export tax

Very few offers are emerging from Chinese mills at present across categories like HRCs, plates, wire rods etc. SteelMint understands that most offers are conditional, in the sense that in case any duty is imposed, it would be on the buyer's account. A tier one mill is offering HRCs at $1,000/tonne (t) while tier two mill is offering HRCs at $970-975/t, CRCs at $990-1,020/t, wire rod coils at $890/t and rebar at $860/t. All prices are on FoB basis.

Chinese mills are otherwise not opting for many deals, but waiting for clarification on whether China will impose the expected export duty or not.

Strong domestic demand

As per the Chinese National Bureau of Statistics, the country's crude steel output touched 99.50 mn t in May as compared to 97.85 mn t in the previous month, up by 2%.

On on yearly basis, steel output was up 6.6% compared to 93.33 mn t a year ago while in Jan-May period it has risen by 13.9% to 473.1 mn t.

Even a 6% yearly increase is quite big, considering that the annual production volume in 2020 was 1,052 mn t. It also shows that China's domestic demand is strong thus making a strong case for the levying the export duty.

On the other hand, their steel exports in 2020 were at 54 mn t but down 16.5% on higher domestic demand. It is expected that, in the near term, if the export tax is imposed, exports from China may fall further.

Slight pressure building on Indian mills

Market indications are that the primary mills are under slight pressure. SteelMint understands that although they are keen on exports, options in the markets are currently limited, due to the following:-

  • They have already exhausted their quarterly quota for Europe.

  • SE Asian mills and end-user industries are not buying at present because of their preference for their local mills.Consequently, it has been heard that mills are busy placing bids or booking orders with export agencies. A source said that this trend indicated piling up of the inventory as the mills were keen to avoid a scenario where production continues but they do not have adequate orders in hand. Such a scenario would inevitably lead to price cuts.

It was also overheard that mills are likely to increase prices next month. But looking at the current scenario, traders say that they are not sure how long the increased prices would sustain or whether the domestic market would be able to absorb the hike.

NMDC's Japan, Korea contracts not renewed

Government-owned miner NMDC's long-term iron ore export contracts with Japanese steel mills and South Korea's POSCO are not going to be renewed, SteelMint learnt from reliable sources.

The reason is that the Government of India has withdrawn the two sops it had provided earlier to NMDC in offering these contracts. These included a reduced 10% customs duty as against the normal 30% paid by private iron ore exporters, and some railway freight concessions as compared to private players.

Sources said that the government aims to keep high grade ore within the country in view of ore shortage from Odisha.

Prices as on 8:55 IST, 17th June. d-o-d changes indicated against closing price of 16th June

 

17 Jun 2021, 09:07 IST

 

 

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