Chinese govt discourages iron, steel exports amid lackluster demand

Workers load steel products at a logistics park in Yichang, Hubei province. [Photo/China Daily]

The Chinese government has been discouraging iron and steel exports in the midst of lackluster demand in the global market, the Ministry of Commerce said on Tuesday.

"China's iron and steel output primarily meets domestic demand. The Chinese government has taken measures, such as increasing the export tariffs on some products, to control exports," said Shen Danyang, spokesman for the ministry.

Shen said the tax refund rate for iron and steel exports is lower than the 17 percent value-added tax rate. The percentage of exports, Shen added, is very low compared with total output.

In the first five months of the year, China's exports of iron and steel increased by 6.4 percent year-on-year, stirring further concerns that the global supply will further outstrip the demand.

"In the first five months in 2015, iron and steel exports increased by 50 percent compared with the same period the previous year. The growth rate this year has fallen by around 22 percentage points," said Shen.

"This has shown that China has restrained its exports to maintain the stability of the world's iron and steel market."

According to a report by zgw.com, an iron and steel trading platform, the export growth of Chinese iron and steel in 2016 will fall significantly. It does not rule out the possibility of negative growth.

On the other hand, as China's exports of iron and steel enjoy the advantage of favorable prices and good quality, total export volumes will still be at a relatively high level, the report said. It is estimated that this year's total exports will be no less than 80 million metric tons and will likely surpass 100 million metric tons.

Shen has said previously that the global economic slowdown was the main cause of iron and steel overcapacity. The Chinese government has been making efforts to keep the production capacity down.

The State Council has issued a plan to reduce crude steel output by 100 to 150 million metric tons within five years starting from 2016.

"At the moment, one of the biggest advantages of China's iron and steel product in the global market is its high quality-price ratio," said Chen Jingfu, analyst at Shanghai-based Mysteel Research Institute.

"But in the future, it should stand out more in quality, service and brand building."

According to Chen, China's iron and steel industry has a priority of meeting domestic demand in the long term. China's growth, which has become more innovation driven, needs large quantities of iron and steel with higher added value. High-tech and environmentally friendly products are going to be in huge demand, Chen added.