China will slash export tax rebates for most steel products to 8% from 11% on August 1 rather than down to 5% this month, according to a governmental source.

"The policy has been delayed due to protests from many domestic steel mills and traders. It was originally proposed for July 1 at 5% for all steel products, however, many industrial officials argued a six percentage point reduction would hurt the Chinese steel sector that is bolstered by booming exports," the source, who asked to remain anonymous, told Interfax during a conference in Qingdao Saturday.

The Ministry of Finance and State Tax Administration Bureau has settled on the policy that will decrease export tax rebates to 8% excluding 23 types of high-value-added steel products, he said. The central government says it wants to cool low-quality steel product production to help control pollution and energy consumption and improve technology. The source said the policy is scheduled to be released on July 25 or July 26 and take effect on August 1.

High-value-added steel products, namely galvanized plate and silicon steel, will remain at the current export tax rebate of 11%, but low-value-added products such as rod, reinforced bar, round steel and hot-rolled medium plate will be cut to 8%.

China slashed the tax rebate on exports of steel products to 11% from 13% in May 2005.

Driven by high steel product prices in the international market, China's steel products exports have shown robust growth since the beginning of the year. In the first five months, China's steel product exports hit a new high of 12.67 mln tons, up 35.19%, while imports decreased 27.59% to 7.75 mln tons.

"China's steel products exports constantly increased and steel products prices recovered significantly this year, although China was still seriously bothered by steel overcapacity," Jia Liangqun, a vice general manager with Mysteel, a leading steel consulting firm, said.

However, Jia said that steel prices would drop in the second half of the year after the tax rebate policy is released and China's fixed assets investment cools down.

"Normally, the domestic construction's peak season is in April and May, when steel product prices reach the highest levels of the year. But steel product prices have slid in the domestic market since they hit a peak on June 13," he said.

The price of hot-rolled plate in Shanghai dropped to RMB 4,180 (USD 522.5) per ton on June 30 from RMB 4,500 (USD 562.5) per ton on June 13.