LME steel futures Beijing raises export tax for steel billets to 25% Chinese shy away from

Print this page Posted on : 04-30-2008 by recycleinme.com

A tax on steel billet exports has driven Chinese producers away from the market and has so far discouraged them from signing up for London’s steel futures, the London Metal Exchange ( LME) has told Reuters. But the LME Commercial Director, Ms Liz Milan, says Chinese interest will revive if the tax is reduced or abolished.

“ We don’t have any Chinese brands listed because there are no Chinese ( billet) exports and the producers are not in the market effectively,” she told Reuters in a recent interview.

“ China has a record of putting on taxes and taking them off. So there’s a likelihood that at some point in the future that tax is going to be removed ... I’m sure as the contract develops we’ll get more interest from the Chinese producers.’’

China, the world’s biggest producer and consumer of steel, has raised its export tax for steel billets to 25 per cent since the start of the year and exports have virtually ground to a halt. “ Consumers looking for billet have had to go to further a field to try to source their requirements. The trade flows have somewhat shifted since we originally looked at the regions,” she said.

“ But nevertheless they are still valid because the consumption is still in the areas that we’ve identified.”

Traders and merchants say due to the shift in trade flows and lack of exports there has been very little Chinese participation in the LME’s billet contracts, which started open outcry trading on the floor of the Exchange on Monday. Milan says interest is coming from elsewhere in Asia.

FAR- EAST INTEREST

“ Just because the Chinese have imposed a tax does not mean the trade in the Far East has stopped,” she said.

Interest from the rest of Far East, including Taiwan, Malaysia and Korea has been strong and half a dozen producers have already registered as approved brands, she said.

“ The fact that Chinese are not exporting does not mean the consumption and the end use has gone away in the region. In fact it is still extremely strong,” she said.

DEMAND

“ You’re still getting a huge amount of construction in Thailand and Vietnam and Indonesia. That’s why we chose that contract and that’s still in place.”

Steel demand from Asia and Oceania is expected to rise 8.6 per cent this year, accounting for more than half world demand, according to industry body International Iron and Steel Institute ( IISI).

Chinese consumption alone is forecast to grow by 11.5 per cent in 2008, accounting for 35 per cent of the global demand. “ Export tax is something that the Chinese authorities put in place and it does not affect the LME contract in any way. We still have business and support in the South East Asia and Far East,” she said. “ I’m sure China will come back in the market eventually,” she said.

Source : Business Line