China's Steel Flood Continues in Global Markets
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China's steel exports have surged significantly as domestic steel producers push surplus production onto the international market due to weak domestic demand. This increase in exports is prompting several countries to consider initiating anti-dumping investigations.
Export Figures and Market Impact
Export Growth: In the first half of 2024, China exported 53 million tons of steel, marking a 24% increase compared to the same period last year. The total steel exports for this year are projected to break the record of 110 million tons set in 2015.
Domestic Surplus: Chinese steel producers' inventories are currently about 4 million tons higher than in 2020, due to sluggish domestic consumption amid an economic slowdown and a prolonged real estate crisis.
Price DeclinesThe glut of Chinese steel on international markets has caused significant price drops:
Southeast Asia: The price of hot-rolled coils has fallen from around $700-900 per ton (including shipping) during 2021 to mid-2022 to approximately $510-520 currently.
Futures Market: On the Chicago Mercantile Exchange, short-term futures for hot-rolled coil steel have plummeted from over $1,000 per ton at the end of last year to about $660 per ton now.
Industry Impact
Japanese Steelmakers: Major producers like Nippon Steel are suffering substantial losses due to falling prices. Nippon Steel forecasted that the price drop could reduce their profits by about 90 billion yen ($573 million) for the fiscal year 2024 compared to 2023.
Global Market Share: Despite China's exports being relatively small compared to its total crude steel production of over 1 billion tons last year, the country accounted for more than 50% of the global output of 1.89 billion tons in 2023. Thus, any reduction in domestic demand leads to increased exports, significantly impacting global markets.
Historical and Current Measures
Global Forum on Steel Excess Capacity (GFSEC): In 2015, record Chinese steel exports led G7 and G20 leaders to address excess capacity by forming GFSEC. China, a G20 member, withdrew from GFSEC in 2019, claiming it had fulfilled its mission.
Recent Actions: In April, Chinese authorities surveyed domestic steel producers and traders and announced a nationwide campaign to curb crude steel production. However, crude steel output increased by 2.75% in May from the previous month, indicating that production cuts have been ineffective.Global ConcernsOne major issue for steel companies in developed countries is the surge in Chinese exports of high-quality steel plates. While China's exports of construction steel bars dropped to below 6 million tons in 2023 from over 30 million tons in 2015, exports of hot-rolled steel plates for manufacturing increased by over 40% to 20 million tons last year, and nearly 12 million tons in the first five months of this year.
Trade Evasion: Due to trade barriers in some countries, Chinese steel often gets re-routed to third countries or processed differently to evade anti-dumping measures. This has raised concerns worldwide.
Anti-Dumping Investigations: Last year, there were five global anti-dumping investigations, three of which targeted Chinese products. In the first seven months of this year, there have already been 14 investigations, with 10 targeting China. Despite the increase, the number of investigations is still lower than the annual average of 39 during 2015-2016, as some developing countries dependent on China avoid such probes to maintain favorable relations.
Future OutlookChina is relocating its electric vehicle and other production facilities abroad, which is likely to increase steel and component exports to these countries. Additionally, Beijing is pushing for "new quality production drivers," aiming to boost investment in high-quality manufacturing like electric vehicles and artificial intelligence. In this scenario, Chinese steelmakers are rapidly increasing their capacity for electro-galvanized steel sheets used in electric vehicle motors.
Potential Trade Conflicts: If domestic overcapacity becomes more severe, Beijing might devalue the yuan to promote exports and stimulate economic growth, potentially escalating trade conflicts with the US, especially with the upcoming presidential election.
ConclusionChina's continued steel production and export surge is reshaping global steel markets, causing price declines and economic strain on producers worldwide. The international community remains vigilant and responsive, with increasing anti-dumping investigations and strategic adjustments to cope with the influx of Chinese steel.
[/tintuc]
China's steel exports have surged significantly as domestic steel producers push surplus production onto the international market due to weak domestic demand. This increase in exports is prompting several countries to consider initiating anti-dumping investigations.
Export Figures and Market Impact
Export Growth: In the first half of 2024, China exported 53 million tons of steel, marking a 24% increase compared to the same period last year. The total steel exports for this year are projected to break the record of 110 million tons set in 2015.
Domestic Surplus: Chinese steel producers' inventories are currently about 4 million tons higher than in 2020, due to sluggish domestic consumption amid an economic slowdown and a prolonged real estate crisis.
Price Declines
The glut of Chinese steel on international markets has caused significant price drops:
Southeast Asia: The price of hot-rolled coils has fallen from around $700-900 per ton (including shipping) during 2021 to mid-2022 to approximately $510-520 currently.
Futures Market: On the Chicago Mercantile Exchange, short-term futures for hot-rolled coil steel have plummeted from over $1,000 per ton at the end of last year to about $660 per ton now.
Industry Impact
Japanese Steelmakers: Major producers like Nippon Steel are suffering substantial losses due to falling prices. Nippon Steel forecasted that the price drop could reduce their profits by about 90 billion yen ($573 million) for the fiscal year 2024 compared to 2023.
Global Market Share: Despite China's exports being relatively small compared to its total crude steel production of over 1 billion tons last year, the country accounted for more than 50% of the global output of 1.89 billion tons in 2023. Thus, any reduction in domestic demand leads to increased exports, significantly impacting global markets.
Historical and Current Measures
Global Forum on Steel Excess Capacity (GFSEC): In 2015, record Chinese steel exports led G7 and G20 leaders to address excess capacity by forming GFSEC. China, a G20 member, withdrew from GFSEC in 2019, claiming it had fulfilled its mission.
Recent Actions: In April, Chinese authorities surveyed domestic steel producers and traders and announced a nationwide campaign to curb crude steel production. However, crude steel output increased by 2.75% in May from the previous month, indicating that production cuts have been ineffective.
Global Concerns
One major issue for steel companies in developed countries is the surge in Chinese exports of high-quality steel plates. While China's exports of construction steel bars dropped to below 6 million tons in 2023 from over 30 million tons in 2015, exports of hot-rolled steel plates for manufacturing increased by over 40% to 20 million tons last year, and nearly 12 million tons in the first five months of this year.
Trade Evasion: Due to trade barriers in some countries, Chinese steel often gets re-routed to third countries or processed differently to evade anti-dumping measures. This has raised concerns worldwide.
Anti-Dumping Investigations: Last year, there were five global anti-dumping investigations, three of which targeted Chinese products. In the first seven months of this year, there have already been 14 investigations, with 10 targeting China. Despite the increase, the number of investigations is still lower than the annual average of 39 during 2015-2016, as some developing countries dependent on China avoid such probes to maintain favorable relations.
Future Outlook
China is relocating its electric vehicle and other production facilities abroad, which is likely to increase steel and component exports to these countries. Additionally, Beijing is pushing for "new quality production drivers," aiming to boost investment in high-quality manufacturing like electric vehicles and artificial intelligence. In this scenario, Chinese steelmakers are rapidly increasing their capacity for electro-galvanized steel sheets used in electric vehicle motors.
Potential Trade Conflicts: If domestic overcapacity becomes more severe, Beijing might devalue the yuan to promote exports and stimulate economic growth, potentially escalating trade conflicts with the US, especially with the upcoming presidential election.
Conclusion
China's continued steel production and export surge is reshaping global steel markets, causing price declines and economic strain on producers worldwide. The international community remains vigilant and responsive, with increasing anti-dumping investigations and strategic adjustments to cope with the influx of Chinese steel.
