It is reported that on June 19th, the State Council disclosed to scrap or reduce a 5% cut of export duty on light & medium sections and other steel products, effecting since July 1st. The announcement soon aroused wide responses across the world.

Mr John Surma executive chairman of US Steel said on June 23rd that the duty adjustment would evidently push up the China's steel export and therefore, affect the interest of steel mills in other regions or countries. And very soon, news said EU would start to impose 24% of anti dumping duty on Chinese steel import.

According to Mr Liu "Clearly, the continuous export duty and rebate adjustments are very likely to trigger trade friction". Sine the beginning of this year, the government has adjusted the duty and rebate policy for four times. However, the effects of all this adjustments were not evident.

Mr Zhou Xizeng with CITIC Securities believes the government is possible to carry out more actions in the future. He said that "The 5% decrease of export duty is comparatively small and has no immediate and evident result" he added. Insiders noted the action has somehow indicated the government's attitude to the steel industry. They believe the worst time of steel industry globally has now passed and recovery is starting to be seen.

Mr Hou Zhiyuan from Lange Steel said "Generally speaking, we understand the duty adjustment is favorable for steel mills to overturn their deficit". However, both domestic and international steel demand shrank sharply amid the global financial crisis and the overall recovery still very much depends on the US and European economy.

At the meanwhile, the relatively stable of Chinese Yuan also dragged down the export to some extent. The Chinese steel prices seem to become more expensive as most of foreign currencies are depreciating, which then result in the lost of China's steel market shares.

In a national congress meeting held June 17th, the state council pointed out that China is on the way out economy bottom and many sectors including manufacture, investment, consumptions all see the positive increase. Experts said "Following the economy recovery, steel demand will increase as well". The investments on infrastructure, auto-making, real estate and manufacturing all increase sharply, and Mysteel understands the demand will soon follow the track to swell.

In contrast to the robust domestic steel demand, the steel export remains comparatively gloomy. Affecting by the economy downturn, overseas steel demand went down about 30% to 40% this year while domestic demand increased 8.67%, largely thanks to the government's CNY 4 trillion stimulus package.

Mysteel understands the package's supporting effect would be more significant in the second half of this year. At the meanwhile, we also very much concern the mills to escalate their production during the recovery. Obviously, the increasing steel output would somehow jeopardize the just recovering and fragile market.

It is also worthwhile to notice that thought China steel industry is over supplied, the products structure discrepancy remains another major problem and many high value added products still largely depends on import. Hence, Mysteel understands it is essential for China's steel to adjust their products mix and upgrade the technology.

At the same time, the statistics of CRU indicate the global steel demand also is on the way of recovering. The latest CRU steel index posts at 134.4 up by 3.5% from that of last month, the largest upward since the second half of last year. It is believed the global steel demand in the second half of 2009 will be more robust, which would, therefore, better the China's export market, as we understand.