China steel exporters scrap, delay shipments
> Rivals for market share gain amid crackdown on smuggling of commodity
MANILA/BEIJING: Tight checks by Chinese customs officials to halt the smuggling of scrap steel to Southeast Asia have forced some exporters to cancel or delay shipments, benefiting rivals like Russia that are prowling for market share amid a raging Sino-US trade war.
Among those that have cancelled or delayed cargoes are Chinese exporters that have been taking advantage of Beijing’s generous tax rebate system on value-added steel, according to two Chinese exporters and a major importer in the Philippines, China’s third-biggest market.
China has for decades given tax rebates to exporters selling value-added steel, allowing them to undercut competitors. China gave up to US$2.8 billion (RM11.4 billion) in such rebates in 2017, according to Reuters calculations based on its alloy steel export volumes.
But the system has been abused by exporters who have claimed rebates of 5% to 13% even for tiny additions of elements such as chromium, while some are alleged to have mislabelled shipments to pass them off as alloy steel.
One of the steel exporters in China’s top steelmaking city Tangshan said his company ditched a third of its shipments last month, adding that other shippers had also called off cargoes fearing their tactics to game the tax system may now be exposed.
“People take advantage of tax rebates or forge export documents to avoid taxes, so the tighter checks are raising the risk to those traders,” said the Tangshan exporter, who declined to say why his company had cancelled its shipments.
Smuggled scrap metal from China mostly flows to Southeast Asia, the same destination of the biggest portion of its legal steel product exports, according to the sources, who declined to be identified due to the sensitivity of the issue.
The volume of cancelled or delayed deals was relatively small and has so far not knocked back China’s exports, which have been driven higher by a wide arbitrage and the nation’s increasing output.
“Exports of products such as strips, square bar and wire rods were affected the most during the recent tightened checks from customs,” said Linda Lin, steel editor at CRU in Shanghai.
These products account for most of the Chinese steel heading overseas. While total export volumes continued to decline last year, shipments of strips went up by as much as 85%, according to customs statistics.
But the pace of cancellations may quicken when customs authorities introduce new rules on Aug 1 that require shippers to answer more than 100 questions on a shipment’s declaration form, up from 40 questions now.
Customs did not give a reason for the new rules announced in June, but traders expect them to make it harder to evade taxes. – Reuters