The Chinese government provides incentives to the steel companies to export certain products and disincentives for others. However, the pressure is to encourage exports – particularly at this time when available capacity outstrips domestic demand for a number of product forms.
Incentives are given in the form of tax rebates for exports of value added products, particularly, low alloy steels. There are disincentives, through extra taxation for exporting semi-finished products. This was designed to avoid exporting valuable resources including the use of energy for conversion of raw materials into basic steel items.
Unfortunately, steel mills and traders often find easy ways to circumnavigate the rules and regulations. Moreover, the authorities accept changes to historic conventions which assist steelmakers to increase their volumes of exports whist appearing to be setting up barriers to restrict them.
Typical of this type of activity are the regulations that restrict tax rebates to exports of alloy steels. Traditionally, the definition of an alloy steel was one which had a minimum of 0.5 percent of alloying elements to improve the mechanical properties of the material. In China, extremely small quantities of alloying elements which did not improve the mechanical properties of the material became acceptable for receipt of a tax rebate if sold in export markets.
As a result of China’s acceptance of a different definition for alloy steels to those in the West, exports specified as alloy steels from China are near 80 percent of the total for many product forms. It is also worth noting that small alloy additions can make steels unfit for purpose, in service, particularly, after undergoing welding procedures.
An unusual feature of Chinese steel export statistics is the discrepancy between foreign sales and receipts from both sides of the process. In 2014, China’s combined total exports, of reinforcing bars, billets and blooms, to the rest of the world, were reported at 213,000 tonnes. By contrast, receipts from Chinese suppliers to other countries were recorded at 8.1 million tonnes. We would expect a small discrepancy in the figures due to the time lag between despatch and receipt of the material but not one of such magnitude.
Clearly the reporting mechanisms are not fit for purpose.