Steel supply and demand in the new situation

From the policy appearance, the further cancellation of export tax rebate will suppress the export demand of related steel such as black iron steel pipe, resulting in a relative rise in domestic supply, and then become the upward resistance of steel price limit expected. However, based on the announcement of the substantial marginal effect on the market, we believe that the current round of iron and steel products import and export tax rate adjustment measures are lower than market expectations, export tax rebate cancellation of the negative impact is limited.

1. Varieties covered by the cancellation of the tax refund policy in this round are lower than expected. Prior to the announcement of this round, the market has been related to the discussion and speculation, and formed in August when China cancelled the export tax rebate for carbon steel pipe, which will be levied on hot rolled coil export tax of 10%-20% rumors of expectations. And yesterday’s announcement did not add hot rolled coil export duty policy, only around the cold rolling, galvanized and other varieties of export tax rebate cancelled. Therefore, the detailed rules issued by the policy to cover the variety and the actual strength is lower than the market expectations.

2. The effect of the cancellation of tax rebate on the export of related varieties is lower than expected. In this round of export tax rebate cancellation measures, cold rolling and galvanized are mainly involved in varieties. Some market views believe that the cancellation of export tax rebates will cause the export cost of such products to increase. According to the price performance, even the cancellation of the export tax rebate of products such as rectangular steel pipe, the cold rolling price has a certain advantage compared with its export country price. In addition, an increase in export costs does not mean an export loss. For cold rolling and other varieties, the cancellation of export tax rebates will cause their export marginal profits to decrease, but the marginal profits are still positive. From the point of view of business operation, the reduction of marginal profit will not be the reason for the cessation of relevant economic activities in the case of favorable and available. Therefore, the effect of this round of export tax rebate on the export of related varieties is lower than expected.

3. The abolition of export tax rebates and production restrictions is a parallel policy. Even in the later period, with the weakening of overseas prices, export marginal profits of pre galvanized steel pipe turn negative, so as to suppress the export of negative domestic prices, but the steel production limit policy has once again received attention, and the policy of reducing crude steel capacity will form a support for steel.