According to the notice of the Customs Tariff Commission of the State Council on the 2017 tariff adjustment program, the export tariff of ferrosilicon has fallen from 25% to a provisional 20% since January 1, 2017.

The export tariff policy of ferrosilicon has been tightened. In order to suppress the blind production of domestic ferrosilicon, alleviate the energy shortage and environmental pollution, while ferrosilicon is an important strategic material, its formation cycle is long and non renewable, in China, the export of ferrosilicon was strictly controlled in the early twenty-first Century. In 2005, China abolished the export tax rebate of ferrosilicon 8%, and raised the provisional tariff rate of export tariff of ferrosilicon four times in 2005-2008 years, from 5% in 2005 to 25% in the current year.

Tariff increases have reduced export competitiveness, and smuggling has become more and more serious. Since the previous increase in tariffs has increased the cost of purchasing ferrosilicon from China, the price has no advantage over Russia and Malaysia and other countries, for example, according to Mysteel data, the current 75A ferrosilicon Tianjin port FOB price of $1160-1190 / ton, 25% tariff and other costs, is still lower than the domestic factory. The mainstream factory price, while the CIF price from Malaysia to Japan is US $1200 / ton, so the domestic price has no advantage, and the export power of the enterprises is weak. Therefore, the illegal traders in China have begun to export through the "low cost" smuggling channels, and the smuggling of ferrosilicon has seriously affected the interests of the regular exporters, and at the same time, it causes the loss of the state tax. According to the General Administration of customs data, the export volume of ferrosilicon reached 1 million 165 thousand and 400 tons in 1-10 months in 2008, and the export volume was only 193 thousand tons in 2016 of 2016. According to industry estimates, the smuggling volume of China's ferrosilicon is 40-50 million tons, far exceeding the export volume of regular trade.

This tax rate cuts favorable export, restraining smuggling and alleviating the pressure of overcapacity. 1) good export and regular export enterprises. Tax rate reduction stimulates export and inhibits smuggling at the same time, for the enterprises of regular export, while obtaining certain export increment, increase the profit space of export; 2) the improvement of export will relieve the pressure of overcapacity in the domestic ferrosilicon industry to a certain extent. As the downstream market of ferrosilicon, the domestic steel industry was positive in 2016, and the output of crude steel increased by 1.1% in 1-11 months. The export trend will further improve the supply and demand pattern, which is beneficial to the enterprise to maintain a reasonable profit level.

Investment proposal: we believe that the interim reduction of 5% of the tax rate is not significant, but it is a positive benefit for the silicon iron industry that is looking forward to the tax reduction for many years, and it recommends the upper reaches of the iron and steel industry chain, and the silicon iron business accounts for more than 36% of the global ferroalloy leading Erdos.