China, the world's largest steel producer, increased its HRC (hot-rolled coil) exports by 28% in the first quarter, reaching approximately 26 million tons compared to the previous year. This increase occurred despite the adverse effects of the real estate crisis on domestic demand.
While East Asia remains the primary market for China's HRC exports, shipments to other regions such as India, the Middle East, and Latin America are also on the rise. This is interpreted as a sign of China's efforts to increase its share in the global market.
However, there are allegations that tax evasion is affecting China's hot-rolled coil exports. According to steel analysts, Chinese traders are reducing VAT payments and offering cheaper export deals to gain a price advantage. A senior official from the China Iron and Steel Association stated that an investigation has been launched into this matter, and necessary steps will be taken to prevent illegal exports.
Market participants suggest that China's HRC exports may face negative headwinds towards the second quarter. This is primarily due to a decrease in export sales in the first quarter compared to the fourth quarter of 2023, as well as continued weakness in HRC demand and prices in the EU and the US.
Far Eastern producers are monitoring the demand situation in Europe, Turkey, and other major consumer countries and focusing on export agreements in Asia. An experienced trade source anticipates that HRC price fluctuations will persist and may even increase.
The results of China's investigation into VAT-free HRC trade could also have a significant impact on HRC exports and prices.
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