MARKET: RCEP welcomed, benefits yet to be assessed
RCEP, which took eight years for the 15 countries including the 10 ASEAN countries, China, Japan, Korea, Australia and New Zealand to come to agreement on cooperating in a number of sectors including trade in goods and services, simplifying Customs procedures, investment, electronic commerce, intellectual property, government procurement, according to various media reports in and out of China on the topic.
Response from Asia’s ferrous commodities community
Eiji Hashimoto, chairman of the Japan Iron & Steel Federation (JISF) and chairman of Nippon Steel, welcomed the RCEP on behalf of the Japanese steel industry, as it will be supportive to a free and fair trade zone in Asia Pacific and an efficient supply chain, as well as to help with Japan’s corporate activities and economic growth.
“Japan’s steel industry strongly supports the Japanese government’s efforts in intensifying and expanding economic partnerships and establishing rules that are indispensable for sustainable growths in both global and the Japanese economy,” he was quoted commenting in a JISF post on the morning of November 16.
“Asian countries are main buyers of the Japanese steel, so we had expected the agreement to be signed sooner and we really welcome the pact,” an official from a Japanese steel mill said.
“We will need to go through the details, but for China, we have roughly understood that a 3-6% of duty will be gradually removed on Japanese steel imports, which will enhance our competitiveness and possibly increase our steel exports,” he added.
The timing is perfect too, as Japan’s domestic steel demand is expected to shrink because of population decline, and the Japanese steel mills will have to lift their exports to survive, he pointed out.
Coal trade between Australia and China may also be with less hurdle, a coal trader commented, despite that China will remain watchful over its own coal imports in general out of environmental concerns.
“Probably that (the two countries' coal trade) will be back to normal starting next year, and the (DCE) coking coal futures plunged this morning, could be a reaction to the RCEP deal,” he sent the comment to Mysteel Global via WeChat.
The most-traded January 2021 coking coal contract on the Dalian Commodity Exchange, for example, closed the morning session of November 16 at Yuan 1,334.5/tonne ($203/t), or down Yuan 29.5/t from that of the settlement price on November 13.
China’s iron ore and steel market sources, however, are still assessing the possible benefits on their respective markets.
“I read the news, but to be honest, I have no idea yet what kind of impact it will be on China's iron ore imports (especially from Australia)," an iron ore trader from South China’s Fujian province said.
A Shanghai-based analyst agreed. “How China's government will execute in the future is the key, and personally, I can’t foresee any change to the current iron ore imports in the short term,” he commented.
China's iron ore imports from Australia are free of tariffs, and the country has been China’s top iron ore supply source for the past many years, Mysteel Global noted.
China’s steel traders also estimated little change to China’s steel imports and exports in the near term.
“The RCEP does not really have much impact on (steel) trading,” a Hong Kong-based steel trader said, as “the largest possible change could be on tariffs, but normal steel trade taxation among these countries are already low… The key still lies in demand,” she said.
A Beijing-based steel analyst echoed, adding that “those existing anti-dumping duties on certain steel products may not be part of the deal and thus unlikely to be reduced or removed.”.
Therefore, “the benefit will be more on consumer goods instead of steel products, and we are still waiting for more agreement details to be released,” he said.
A French market source, nevertheless, was excited at the prospect of RCEP.
“Indeed a great news. It would help to drive down the price of many products and in turn Europe or US would be benefited out of it,” he commented on Singapore Prime Minister Li’s post.
RCEP to promote multilateralism and regionalization
With or without immediate benefits to the ferrous commodities, RCEP shows the willingness of the 15 countries, with the world’s 30% population or GDP, to nurture regionalization among them all and India is welcome to join the pact anytime when it is ready too, according the various media reports.
"The signing of the RCEP is not only a landmark achievement of East Asian regional cooperation, but also a victory of multilateralism and free trade," China’s Premier Li Keqiang was quoted commenting in a Xinhua news report on November 15.
“This is a major step forward for our region. At a time when multilateralism is losing ground, and global growth is slowing, the RCEP shows Asian countries’ support for open and connected supply chains, freer trade and closer interdependence,” Singapore Prime Minister Lee Hsien Loong commented in his LinkedIn post on November 15.
Besides, ASEAN and Japan have been China’s top trade partners and the RCEP will surely strengthen the bonding, Mysteel Global noted.
Over January-October, for example, the ASEAN trade value with China totalled Yuan 3.8 trillion or accounting for 14.6% of China’s whole foreign trade value, up 7% on year and having safeguarded its top position, and Japan, China’s fourth largest trade partner, realized bilateral trade with China valuing Yuan 1.8 trillion, 6.9% of the total or up 1.5% on year, according to China’s customs data.
ASEAN has also been a key region for many nonferrous minerals exports to China such as nickel, and copper and Chinese overseas steel-related investments, Mysteel Global noted.
Written by Mysteel Global Editorial from China, Japan and Singapore, ferrous.news@mysteel.com
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