China’s Ministry of Industry and Information Technology (MIIT) is considering resuming its tax refund policy to help the country’s steelmakers now suffering heavy losses

If approved by MIIT, producers of special steel in the country, will enjoy a full refund of 17% value added tax paid on special steels sales for supplies to export orientated domestic manufacturers. The policy aims to encourage export-oriented processing and manufacturing enterprises in the country to use domestically sourced raw materials and semi-finished products, which can to some extent improve the demand in the country’s steel market.

MIIT called on domestic steel mills to cooperate with downstream customers in logistics and service areas so that they also become service providers as well as producers instead of playing isolated single roles. The international and domestic economic downturn has caused China’s steel sector to suffer heavy losses in the first half 2012. Fangda Special Steel Technology, for example, after experiencing a rapid growth for a long period of time, reported a year on- year decline of 39.45% in net profit for the first half of 2012, which stood at RMB 21M (US$3.29M).

Evidence in a much broader perspective came when the China Federation of Logistics and Purchasing (CFLP) released the purchasing managers’ index (PMI) for China’s iron and steel sector – which fell to 44.5% in July from the 49.2% in June.

Source: China Metals e-mail