Chinese steel may create global glut

Asia Times Online

BEIJING – After a long period of pulling in huge imports of steel and thus boosting the world market, China is gearing up for a new role as a net steel exporter that may turn recent global shortages of steel into oversupply and depress regional and global prices.

China’s output of steel products this year is set to outpace consumption, driving up exports and building up stocks. The feared scenario is that Chinese steelmakers may be blamed as the country’s surplus products begin to flow in the international market, pushing down prices and possibly sparking a rash of bankruptcies in the global steel industry. Because of this, Chinese economic planners are preparing to deal with a glut of steel on the world market as early as the end of this year. Their plans also include aggressive measures to arrest surging steel exports and attempts to cool down the overheated industry.

Under a ban effective May 19, Beijing will prohibit factories in China from making steel goods for foreign clients with imported iron ore provided by overseas firms. ‘The measure is in line with the state’s macroeconomic controls and the development policy for related industries,’ the Ministry of Commerce said in a statement this week.

The iron and steel processing trade in China is now free from tariffs and value-added taxes on material imports and finished product exports. The ban on the iron and steel processing trade is the third consecutive action taken by the Chinese government within less than two months to tame the nation’s skyrocketing steel exports, according to China Daily. On April 1, China eliminated a 13% tax rebate for steel billet and ingot exports. It also slashed the tax rebate for exports of some steel products to 11% from 13% on May 1.

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