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China’s steel exports are projected to reach an eight-year peak this year, flooding the global market with affordable supply and escalating international trade tensions.
Shanghai-based consultancy MySteel anticipates that exports from China, the largest steel producer globally, will exceed 100 million tonnes in 2024, the highest level since 2016.
“Steel exports have been soaring this year,” stated Vivian Yang, head of editorial at MySteel. She predicted total steel exports to range from 100 to 101 million tonnes for the entire year, marking the third-highest volume ever.
A decrease in domestic demand within China, which contributes to over 50% of global steel production, has prompted manufacturers to boost exports, mainly to nations in south-east Asia and increasingly to Europe.
“China has been saturating the market with steel, driving prices down,” noted Ian Roper, commodity strategist at Astris Advisory Japan. Roper foresees an increase in trade disputes as countries strive to shield their domestic steel industries from competition with the world’s leading producer. “More trade cases” against China are expected to be initiated in the upcoming months, he added.
These cases could lead to countries imposing higher tariffs on Chinese steel, which is already subject to duties in multiple nations.
Several emerging market economies like Mexico and Brazil have already raised tariffs this year, while others such as Vietnam and Turkey have initiated new investigations.
The US tripled its tariffs on Chinese steel this year, and the EU launched an anti-dumping probe into Chinese tin-coated steel products in May. Canada also announced fresh tariffs on steel recently.
On Thursday, the China Iron and Steel Association, representing the country’s major state-owned mills, urged steelmakers to cease their “cutthroat competition” and accused them of relying on “price wars” to seize market share.
The China steel price index from the association hit an almost eight-year low as of August 16. In Europe, spot prices for hot-rolled coil decreased by nearly 20% since the beginning of the year.
A decline in Chinese construction and economic activities has led to a drop in domestic demand, while steel producers have been sluggish in curtailing their output, resulting in oversupply.
As a sign of Beijing’s apprehension regarding the situation, the Ministry of Industry and Information Technology suspended approvals for new steel plants in August.
Anticipated surges in China’s steel shipments to Europe in the forthcoming months, particularly for hot-rolled coil, used in items like automobiles and machinery, are expected.
“A spike is expected in the upcoming months,” stated Colin Richardson, steel lead at Argus Media, a commodity price data provider, highlighting the continuous rise in China’s exports of hot-rolled coil over the past year.
Despite Europe imposing hefty tariffs on Chinese steel, at least 18.1%, Chinese domestic prices for hot-rolled coil have recently dropped to a level where they are cost-competitive in Europe, even with the additional duties.
Daniel Hynes, senior commodities strategist at ANZ Research, the research branch of one of Australia’s major banks, noted that Chinese steel producers, typically exporting between 7 and 10% of their total production, have benefited this year from robust demand in Europe and Asia.
“Especially when we witness producers in certain regions, such as Europe, grappling with higher energy costs… that has paved the way for Chinese steel producers,” Hynes explained. However, he mentioned signs of a softening in global demand in recent months.
Baowu Steel Group, the largest steelmaker globally, cautioned in August that the steel sector was confronting a severe and prolonged downturn surpassing previous steel crises of 2008 and 2015.
Chinese steelmakers are deeply in debt, accumulating losses of RMB2.8 billion ($390 million) in the initial seven months of this year, as per official figures. Only 1% of Chinese steel mills are profitable, according to MySteel.
Data visualization by Leslie Hook and Aditi Bhandari