Exporters see little benefit to tax cut: Correction

Corrext export data in paragraph 7

China's elimination of its export duty on steel billet from 1 January is unlikely to boost shipments because trading firms are already using a square bar tax rebate to export billet.

China removed the 10pc export tax on billet for 2019, according to a ministry of finance listing released on 29 December. The billet export tax was 15pc in 2017 before it fell to 10pc in 2018. The export tax is imposed on top of the 16pc value-added tax (VAT).

Even with the removal of the export tax, Chinese billet remains uncompetitive into Asia, traders said. There are few offers in the market.

The domestic price for billet at 3,280 yuan/t ex-works in Tangshan that equates to a price of $485/t fob north China with a $7/t freight fee to the port. CIS billet sold at $443/t cfr Philippines last week, well below China's price levels. The Argus fob Black Sea billet price at $395/t yesterday equates to a delivered price of around $445/t cfr Philippines with a freight rate of $50/t.

Chinese exporters can receive a 13pc VAT tax rebate for billet if they declare it as square bar. China has repeatedly cracked down on customs tax fraud, with mass arrests in mid-2018 and a new customs declaration form in August, but the practice continues.

"Zero export tax on billet is meaningless because exporters are still exporting billet declared as square bar to get the 13pc tax rebate," an east China exporter said.

China exported 1,992t of billet in January-October under the HS codes affected by the export tax changes, up from 868t in the same period in 2017. Most of China's billet exports are declared as square billet, but square bar export volumes cannot be broken out because it falls under the same HS code as rebar, Chinese traders said.

China's steel export prices are inclusive of the 16pc VAT tax minus any rebates. Rebar exports receive a 13pc VAT rebate, so fob China rebar prices include the net of 16pc minus 13pc, or 3pc VAT tax, after rebate. Hot-rolled coil (HRC) exports receive a 10pc VAT rebate, so fob China HRC prices include the net 6pc VAT.