China Custom’s increased surveillance on Chinese steel exports is causing delays in shipments to ASEAN, Kallanish notes. It is unclear when or how or even whether the shipments would eventually arrive, regional trading sources say.  

Certain steel products from China have long been traded in the region at low prices because the exporters involved do not fully pay the VAT due for these exports. The latest enforcement action undertaken by customs authorities started around three weeks ago.

“I heard there were some delays shipping out from Qingdao and Tianjin because the shippers need to produce proof that they paid the tax before the cargoes can be allowed onto the ships,” a Manila trader says. The delayed cargoes to Philippines are mostly for wire rod, galvanized and pre-painted steel. 

“The Chinese suppliers are asking the [Philippine] customers to add a price on top to help pay the tax,” the trader says. “I am guessing it would mostly depend on the supplier and whether they can absorb the sudden additional cost and how they manage the relationship with the customers.”

“I have orders for June shipment originally that are still pending,” a Manila trader notes. Not knowing when the cargoes will arrive is “the more stressful part and customers are already pushing” for their cargoes, he adds. “The suppliers are trying to find solutions”, without involving buyers so far. They should not be asking buyers for some compensation as the “non-VAT is their look-out”, he adds. “How can buyers pay for the VAT?” a Chinese trader asks. “The seller must handle this themselves,” he adds.

Zinc, aluminium, magnesium alloy-coated steel (ZAM) exports from China, which were evading VAT, have also been delayed, a regional trader says. “It seems there are no new offers in the last few days,” he adds. ZAM is still hot-dipped or aluminium-zinc coated steel with slight modification to bypass anti-dumping duties in Thailand, he notes. Another agrees: "This [business] has been going on for a long time now."

“Traders told customers that they will delay the cargoes for one month. If they can buy cheap cargoes as a replacement, they will deliver. If not, they may cancel,” a Hanoi trader observes. He hears that at least 300,000 tonnes of hot rolled coil, wire rod, HDG and ZAM due for Vietnam are in limbo. He also notes that many traders currently do not want to discuss non-VAT offers or anything related to this business.

“It was just a matter of time that the state will crack down on this,” a third Manila trader notes. “It was common knowledge" that the steel prices from Chinese private mills were 5-8% cheaper than those from state-owned mills which exported VAT-compliant steel. “New prices are now higher because they are the same as state-owned mills’ prices,” he concludes.