Shanghai steel futures rally on export tax rebate cancellation

Chinese steel rebar and hot-rolled coils futures rose on Thursday, after Beijing announced adjustments on tax and tariffs for some ferrous products to support domestic crude steel production cuts.

 

The country's finance ministry said on Wednesday that export tax rebates for 146 steel products would be cancelled from May 1. It also exempted temporary import tariffs for some primary steel products and hiked export tariffs for ferroalloys as well as high-purity pig iron.

 

The measures, aiming to secure more steel resources at home and to curb iron ore prices, are seen as preparations to support more policies on curtailing domestic steel output.

 

“It suggested the urgency and necessity of the launch of major policies…and government's confidence on cutting production,” CITIC Securities said in a note. It added that trade volumes will still be affected by price spreads with overseas markets but the long-term impact will be profound.

 

The most-traded construction rebar on the Shanghai Futures Exchange SRBcv1, for October delivery, rose 1.9% to 5,452 yuan ($842.53) per tonne and hot-rolled coils SHHCcv1, used in the manufacturing sector, jumped 1.8% to 5,787 yuan a tonne.

 

Both of them closed at record highs. “We still believe the reasonable steel prices, take hot-rolled coils for example, should be at 6,000-6,500 yuan per tonne,” CITIC Securities' analysts said.

 

Benchmark iron ore futures on the Dalian Commodity Exchange DCIOcv1, for September delivery, fell 0.8% to 1,127 yuan a tonne.

 

Spot prices of iron ore with 62% iron content for delivery to China SH-CCN-IRNOR62 declined $1 to $193.5 a tonne on Wednesday, according to SteelHome consultancy.

 

“The new policy settings will likely weigh on China's iron ore demand as economic incentives to use more imported scrap steel have increased,” analysts with Commonwealth Bank commodities wrote in a note.

 

Dalian coking coal DJMcv1 inched up 0.1% to 1,767 yuan a tonne while coke futures DCJcv1 were up 1.1% to 2,705 yuan. Shanghai stainless steel futures SHSScv1 slipped 0.1% to 14,510 yuan per tonne.

 

Source:Reuters

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