On April 28, the steel industry welcomed another major policy.
According to the website of the Ministry of Finance, the Tariff Commission of the State Council issued an announcement stating that tariffs on some steel products will be adjusted starting from May 1. At the same time, the Ministry of Finance and the State Administration of Taxation issued an announcement on the cancellation of export tax rebates for some steel products.
analyzes that in order to make up for the supply gap caused by the decline in domestic crude steel production, the state has canceled the export tax rebate policy for some steel varieties. China exports 60-70 million tons of steel a year. The cancellation of export tax rebates will cause more than half of the steel to return to the country, which may cool the steel market.
Adjust tariffs on some steel products and cancel export tax rebates
The Tariff Commission of the State Council "Announcement on Adjusting Tariffs on Some Steel Products" stated that in order to better ensure the supply of steel resources and promote the high-quality development of the steel industry, with the approval of the State Council, the Tariff Commission of the State Council Recently, an announcement was issued to adjust tariffs on some steel products starting from May 1, 2021. Among them, a zero temporary import tax rate will be implemented for pig iron, crude steel, recycled steel raw materials, ferrochrome and other products; the export tariffs for products such as ferrosilicon, ferrochrome, high-purity pig iron, etc. will be appropriately increased to 25% after adjustment. Export tax rate, 20% tentative export tax rate, 15% tentative export tax rate.
The Ministry of Finance and the State Administration of Taxation issued the "Announcement on Cancellation of Export Tax Rebates for Some Steel Products" stating that starting from May 1, 2021, the export tax rebates for some steel products will be cancelled. The specific execution time is defined by the export date indicated on the customs declaration form for export goods.
The Customs Tariff Commission of the State Council stated that the above adjustment measures will help reduce import costs, expand the import of steel resources, support the reduction of domestic crude steel production, guide the steel industry to reduce total energy consumption, and promote the transformation, upgrading and high-quality development of the steel industry.
What will be the impact of canceling the export tax rebate for steel?
In early April, the National Development and Reform Commission and the Ministry of Industry and Information Technology conducted research and deployment on the "looking back" of steel overcapacity reduction in 2021 and the reduction of crude steel production. The crude steel production reduction work in 2021 will focus on reducing the crude steel production of enterprises with poor environmental performance, high energy consumption, and relatively backward process equipment levels to avoid "one size fits all" and ensure that the national crude steel output in 2021 is reduced year-on-year.
In addition, since December last year, the Ministry of Industry and Information Technology has repeatedly mentioned that reducing production in the steel industry is an important measure to implement the goal of " carbon peaking and carbon neutral ".
Data from the China Iron and Steel Association shows that in early April 2021, key statistical steel companies produced a total of 22.7393 million tons of crude steel. The average daily crude steel output this ten days was 2.2739 million tons, a month-on-month increase of 2.88% and a year-on-year increase of 16.86%.
CITIC Construction Investment 's research report believes that so far, crude steel production is still growing positively year-on-year. To achieve negative growth throughout the year, larger-scale production cuts will be needed in the later period. In view of the continued growth in demand, but the imminent reduction of crude steel production, it is a favorable means to guide the adjustment of import and export. The cancellation of tax rebates for steel exports will guide the reform of import and export in the medium and long-term dimension. However, the mismatch between overseas supply and demand is more serious this year, and the effects of the cancellation of short-term tax rebates are expected to be more effective.
"Crazy Stone" Iron Ore Index Hits a record high
Global steel prices have continued to rise since November last year. The most representative medium-grade ore price index Platts 62% Iron Ore Index reported 193.65 on April 27. The U.S. dollar hit an all-time high.
According to Wind data, the current rebar has reached a 10-year high. As of the market close on April 28, the main rebar futures contract listed on the Shanghai Stock Exchange closed at 5,358 yuan/ton, with a cumulative increase of 28.3% since the beginning of this year.
The reason why the price of iron ore has hit new highs repeatedly is closely related to the high demand from steel mills and the high price of crude steel. Entering the second quarter, steel inventories continued to decline. S&P Platts Iron Ore Index Manager Wang Yangwen told China Business News that in addition to strong demand in China, the global macroeconomic recovery has also boosted steel demand outside China, increasing total steel production and iron ore stone consumption.
China Iron and Steel Industry Association said yesterday that it is necessary to take effective measures to increase the development and mining of iron ore at home and abroad, improve the resource security capabilities of the steel industry, and curb the rising trend of iron ore prices.
The performance of steel stocks is improving, and the investment in the sector is highly cost-effective.
Wind data shows that as of April 28, 15 of the 37 listed steel companies have previewed their first quarter performance in 2021, except for Changbao Shares , the remaining companies are all pre-increases, and most of them are expected to double their net profit attributable to the parent company year-on-year.
Huabao Securities said that from the perspective of overseas steel production in March, the daily average hot metal decreased month-on-month, the daily average crude steel recovery slowed down, and the overall overseas steel supply slowed down. In March, domestic iron ore imports increased by 18.85% year-on-year, and the supply and demand of raw materials continued to improve. The gross profit per ton of steel of the three major products increased month-on-month last week, and the profits of hot-rolled and cold-rolled products continued to be high. Overall, under the expectation of stabilizing steel prices, the gross profit margin of steel products will remain at a high level, and the profits of steel companies will return to high levels. With the monetary policy being stable, the low valuation and high dividend yield of steel stocks make investment in the sector cost-effective and defensive. It is recommended to continue to focus on related companies with high dividend rates in the sector and companies that produce high-end cold-rolled series products.
Shengang Securities stated that the general direction of the supply-side decline in the steel industry remains unchanged. Signs of marginal weakening in short-term building materials demand and high spot prices affect the pace of supply contraction. We will continue to pay attention to the policy of tightening production limits in the future and the possibility of staggered demand peaks in the peak season. , at the same time, the profits of spot and futures tons of steel remain high. In the long term, the recovery of corporate profits is certain, and it is expected to continue to be realized in the interim report. Pay attention to the substantial improvement of the industry's supply and demand pattern caused by the subsequent production restriction policy. Recommend targets with increased plate share, improved profitability, and high certainty of production increase, focusing on Baosteel Co., , and Valin Steel .
