China
announced on Wednesday that it would scrap tariffs on certain steel products
and raw materials starting on May 1, in a bid to curb iron ore consumption amid
skyrocketing prices that have hurt domestic businesses, while benefiting
foreign suppliers such as Australia.
The
Tariff Commission of the State Council also made a series of adjustments to
tariffs on other raw materials and products related to the steel industry.
Meanwhile, exports tariffs are hiked for certain iron products.
The
adjustments are conducive to reducing import costs, expanding the imports of
steel resources, and supporting the reduction of domestic crude steel output,
according to the Xinhua News Agency.
The new
measures will prompt the steel industry to reduce energy consumption, promote
the sector's transformation and upgrading, and support its high-quality
development, Xinhua reported, citing the commission.
Industry
insiders said that these moves are intended to level costly iron ore imports
and thus reduce steel prices.
"China
is strengthening the development of domestic iron ore mines. Meanwhile, it's
temporarily eliminated import tariffs on pig iron, crude steel, recycled steel
raw materials, ferrochrome and other products, which can effectively reduce the
amount of imported iron ore," Ge Xin, a senior analyst with Beijing Lange
Steel Information Research Center, told the Global Times on Wednesday.
Wang
Jianfu, assistant to the general manager at Shanghai-based consulting firm
Steelhome, told the Global Times on Wednesday that the moves signaled the
Chinese government's intent to shore up steel imports and curb steel exports
with the aim of ensuring the domestic supply of iron ore.
The
import tariffs were formerly set at 1 percent so the effect will be small but
"given time, the policy, in combination with other policies, will
effectively rein in runaway iron ore prices in the second half of 2021,"
Wang said.
Wang
noted that due to the sudden upward surge of steel prices, Chinese steel mills
had flat margins while running at full throttle for April, leaving them unable
to cope with the sudden price hike."The security of the steel industry is
at stake due to the reliance on imported iron ore," Wang said.
However,
the iron ore industry, dominated by a few global suppliers including mining
giant Rio Tinto and an "unreasonable" pricing mechanism, has seen
prices hit record highs.
In the
first quarter, China's imports of iron ore reached 283 million tons, up 8
percent year-on-year, while the import price averaged $150.79 per ton, up 64.5
percent year-on-year, according to the China Iron and Steel Association (CISA).
That has
significantly lifted up steel prices in China. As of the end of March, China's
steel price index stood at 136.28 points, up 9.44 percent from the beginning of
the year, CISA figures showed.
Given
the huge impact of rising iron ore prices on China's steel industry, Luo
Tiejun, CISA vice president, said at an industry conference on Tuesday that
China was studying measures to expand supplies to curb prices.
The
soaring prices have received much attention at the government level and
research into possible measures is in progress, Luo said.
The new
tariff policy, which will take effect at the start of May, is a way to tame
iron ore demand in a bid to reduce dependence on imports, and it will certainly
be effective in the long run, said Ge.
Recycled
steel can be imported to replace domestically produced steel, and this will
reduce the imports of iron ore, experts said.
While
the move is aimed at protecting domestic industries, it also came amid an
escalating diplomatic spat between China and Australia, which supplies 60
percent of China's iron ore imports, as prices skyrocket.
Australia
has considerably profited from the skyrocketing price, with the value of its
exports to China at record highs,
Chen Hong, a professor and director of the Australian Studies Center at the
East China Normal University, told the Global Times on Wednesday.
However, Chen said China's new adjustment of the
tariffs will obviously lower the abnormally soaring prices to be more
reasonable.
China has already been pushing for a
diversification strategy since last year, ramping up development of domestic
mines and tapping African iron ore resources via cooperation.
Source:
globaltimes