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03. August 2007

China's net steel exports expected to fall 60 per cent in 2007

Mumbai: China's crude steel exports are expected to fall by a whopping 60 per cent during the second half of the year compared with the first six months with the government adopting serious measures to discourage exports, the China Iron and Steel Association (CISA) said.

Net exports of crude steel from China, which stood at 30.6 million tonnes during the first six months, are expected to fall to 12.24 million tonnes in the second half of the year, CISA secretary general Luo Bingsheng said.

Between April and June this year the China lowered export rebate rates of some special steel products and cold-rolled products to 5 per cent. The government also removed export rebates on 83 steel products and lifted the export tax from 5 per cent to 10 per cent on steel from June 1. It also raised export taxes on primary steel products by 5 percentage points.

China has been controlling steel exports as part of measures since last year aimed at reducing its soaring trade surplus, especially with the US government in the first six months of this year, China's trade surplus jumped 84 per cent to $112.5 billion.

On 1 July China slashed export tax rebates for more than 160 steel products to 0 per cent or 5 per cent from 11-13 per cent.

Luo said July-December exports would plunge by 40 to 50 per cent from those in the first six months. "But the policy doesn't mean the less steel exports the better. We should keep it at a proper level," he added.

He said exports should account for one-tenth of China's steel production.

In the first half of this year, crude steel production in China rose 18.9 per cent to 237.6 million tonnes.

Luo predicted full-year production will climb 14 per cent to 480 million tonnes.

An export slowdown will add to domestic steel supply and could cause a glut in the market and plummeting of prices, he said.

As of end-June, international steel prices were 35.9 per cent higher than in the domestic market on average, according to the steel association's data.

The government plans to reduce China's steel production capacity by 35 million tonnes this year.

Meanwhile, China's crude steel consumption rose 9.6 per cent to 206.9 million tonnes <//a>in January-June crude steel consumption in the country. Total consumption during the year is expected to rise 12 per cent to 446 million tonnes this year.

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