Expected Chinese Steel Rebates Postponed

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As China’s steel exports fell by 7.2% during the first 8 months of this year, it was widely seen as a successful implementation of the state’s ongoing market manipulation. Government tax measures were introduced to discourage production of what were seen as energy intensive and polluting steel products. Unfortunately as steel exports fell so did the rate of growth of almost all other exports and certain sectors like textiles, toys and shoes which fell in absolute terms. As one policy was successfully unfolding a wider fear has been growing that worldwide demand is slowing so fast that it is beginning to seriously impact China’s economy. And so a debate had opened during this summer along the lines of maybe we shouldn’t be discouraging steel exports after all. Recent expectations have been that tax rebates on steel products may be re-introduced to support sales but August’s figures have taken observers by surprise as exports have soared 63.3% to a record monthly level of 7.7 million tons, in spite of weaker global demand. At the same time, imports have dropped to 1.3 million tons making August the highest net positive trade balance in steel at 6.4 million tons. The falling imports and rising exports are further signs of China’s slowing growth. With the EU now looking as if they will not press anti dumping cases against China, it would appear we can expect to see more Chinese steel on the international market than may have been the case earlier this year.

–Stuart Burns

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