The Inside World website has reported that the China Ferro Alloys Producers Association has submitted a memorandum to the Central Government of China with a request to establish countermeasures for a depression in the market.
The contents of this memo are not yet known but even after Lunar New Year in China, the economic circumstances surrounding Chinese producers of ferroalloys have deteriorated further on the contrary to expectation with market prices of ferroalloys continuing to fall. Being stimulated by these countermeasures to sustain the economy as adopted by Chinese Government in advance of Lunar New Year, the requirement of ferroalloys in China had increased but this expansion of purchases just supplemented stocks and was unable to connect with the continuous demand for ferroalloys.
In view of the these circumstances, the Association has proposed the following countermeasures to support the ferroalloy industry of China:
1. Revival of export tax rebates
The Central Government of China announced on the March 27th that it was to resume the export tax rebate on high grade steel products from April. This resumption of export tax rebate is applied to such high grade steel products as stainless steel products, silicon steel sheets, cold-rolled steel sheets high speed steel and alloy steels. In case of ferroalloys any concrete movement to resume export tax rebates has not been seen but, in view of the resumption of export tax rebates on high grade steel products, it is supposed that some countermeasures for ferroalloys will be possible to expect. Export tax rebates on ferroalloys were revoked from January of 2005.
2. Reduction of export duties
The Central Government of China reduced the duties on the export of Chinese steel products in January. On the other hand, the production of ferroalloys in China has been closely linked with the problems of environmental pollution. Since the Central Government of China has sought to reduce the quantity of ferroalloys to be produced for export, it is marked to see how the Government copes with this subject and the ferroalloy industry of China is now moving to reduce the duty on exports of ferromanganese and ferrochrome, both of which consume less volume of electric power for production.
The China Ferro-Alloy Producers Association said at the beginning of last week that the Central Government of China will announce in due course a reduction in the duty on exports of Chinese manganese- and chrome-based ferroalloys from the second half of 2009. The background of this aspect is due to the fact that the quantities of ferroalloys imported into China in January and February of 2009 were larger than those exported from China in the same period. The ferroalloy industry of China was once held up as a prime export industry but the industry has been shaken by imports of ferroalloys at discounted prices from overseas countries.
The export duties on ferroalloys was raised from January of 2008 to 20% - 25% and these exports duties still stand. On the other hand, the duty imposed on imports of ferroalloys into China is only 2%. Consequently, Indian high carbon ferrochrome has taken the offensive for an aggressive sales pitch from the autumn of 2008 and Chinese high carbon ferrochrome has become less competitive.
Indian high carbon ferrochrome has been offered at 58 US Cents per lb of Cr CIF China. The cost of producing high carbon ferrochrome in China is estimated to be higher than 65 US Cents per lb of Cr. The same applies to Chinese silicomanganese which is now being offered at USD 1,300 per tonne CIF Japan. The price of Indian product offered for Japan is less than USD 1,100 CIF. This price differential of USD 200 per tonne is equal to the duties imposed on exports from China. Therefore there have been calls to impose antidumping duties on imports of ferroalloys into China.
3. Reduction of electric power fee
The temporary reduction of the cost of electric power in major ferroalloy production zones for the period from December 2008 to 15 March 2009 has ended and the cost of electric power has returned to its normal levels. There have been moves to revive this discount with Inner Mongolia taking a lead. However, the National Development and Reform Commission has criticised a lack of consistency on the administration of electric power and the policy between Central and Local Governments do not match each other.
Source: Steel Guru
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