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China to scrap export rebates despite yuan rise

https://www.chemnet.com   Jun 24,2010
BEIJING/SHANGHAI (Reuters) - China will scrap tax rebates to exporters of dozens of commodities including key steel products, corn starch, rubber products and ethanol, the finance ministry said, while they also face a rise in the yuan.


The decision has disappointed local steel mills, which were hoping for more government support as they come up against potentially calamitous margin pressures in the third quarter as well as a further decline in exports as a result of the rising yuan.


"Chinese steel exports have already been difficult and have lacked price competitiveness, and we will face a much tougher environment if some taxes aren't rebated," said an export manager with a major steel mill.


From July 15, the steel industry will see the removal of 9 percent tax rebates on hot-rolled steel coil, sections, some narrow cold-rolled coil products and hot-dipped galvanized coil, the ministry said on its website (www.mof.gov.cn) on Tuesday.


The rebate cut was widely expected by the market, despite denials by the China Iron and Steel Association last month. But some traders had expected the government to relent following the central bank's decision to allow the yuan to appreciate after 23 months.


The decision to go ahead with the cuts suggests Beijing remains determined to consolidate China's chaotic steel sector as well as ease trade frictions.


China's steel exporters have been subject to a series of anti-dumping measures by the United States, which cited subsidies in the form of low-cost loans, cheap land and export tax incentives.



CORN STARCH, COPPER


The removal of a 5 percent rebate on corn starch and ethanol is part of China's efforts to improve supplies on the domestic market.


China will also cancel 5 percent rebates on exports of semi-finished copper products such as rods, bars, profiles and wires, and semi-finished nickel products including plates, sheets, strips, foils and tubes.


Analysts said the copper export market would certainly feel the impact.


"Without the rebates, there should be no margins (on the exports)," said Yang Changhua, a copper analyst at state-backed research group Antaike.


China will also remove 5 percent rebates on lead products such as plates, zinc products such as bars, rods, profiles and wire, and tin products such as bars, rods, profiles and wire.


China is the world's top consumer of many base metals, and the rebate cut could reduce outflows and affect the country's metal consumption.


But Yang played down the impact on the copper market, saying exports were negligible compared to domestic consumption.


In the first five months of the year, China exported 4,650 tonnes of copper bars, rods and profiles. The outflow was up 76 percent on the year.
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