Steel exports from China seem poised to reach an eight-year high this year, potentially swamping the world with low-cost supply, and further intensifying global trade anxieties.
According to Shanghai-based consultancy MySteel, Chinese exports — which account for more than 50% of worldwide production — are expected to hit 100 million tonnes in 2024, the highest since 2016.
A fall in domestic demand in China has led producers to export more material, mostly to south-east Asia, but increasingly to Europe.
Due to a slowdown in construction and broader economic activity, the world’s second-largest economy grew 4.7% between April and June, its slowest since the first quarter of 2023, and missed analyst forecasts of 5.1%. It was also down from the 5.3% expansion in the previous quarter.
“China has been flooding the world with steel and pushing prices down,” says Ian Roper, a commodity strategist at Astris Advisory Japan, noting that some countries may retaliate in an effort to protect their own steel producers from competition.
“More and more trade cases” will likely be filed against China in the coming months, he adds.
Such cases could lead to countries imposing higher tariffs on Chinese steel, which already faces duties in a number of nations. Some emerging markets, such as Mexico and Brazil, have raised tariffs this year, while Vietnam, Türkiye, and others have launched investigations.
The US has so far tripled its Chinese steel tariffs this year, and the EU began an anti-dumping investigation into tin-coated steel products in May.
Canada, following the lead of the US and EU, said last week it would impose a 25% tariff on steel and aluminium imports from China. Prime Minister Justin Trudeau said the measures were designed to counter what he called China’s intentional, state-directed policy of over-capacity.
“I think we all know that China is not playing by the same rules,” Trudeau told reporters.
“What is important about this is we’re doing it in alignment and in parallel with other economies around the world.”
In an effort to address the situation, the China Iron and Steel Association, which represents the country’s major state-owned mills, on Thursday urged steelmakers to end their “vicious competition” and accused them of “relying on ‘price wars’ to grab market share.”
China’s Ministry of Industry and Information Technology had also elected in August to suspend approvals for new steel plants.
According to official figures, China’s steelmakers are deeply in the red, accumulating losses of some US$390 million ($576 million) during the first seven months of 2024. Figures published by MySteel show just 1% of the country’s steel mills are profitable.
The world’s largest steelmaker, Baowu Steel Group, warned last month that China’s steel sector is facing a “harsh winter” that will be “longer, colder, and more difficult to endure than we expected.”
Still, steel shipments from China to Europe are expected to surge over the coming months, particularly for hot-rolled coil, which is used for products such as machinery and automobiles.
Europe has already placed tariffs on Chinese steel of at least 18.1%, but domestic prices for hot-rolled coil have sunk to a point where they are cost-competitive with Europe, even with the additional duties.
Daniel Hynes, a senior commodities strategist at ANZ Research, says China’s steel producers, which typically export between seven and 10% of their total production, had benefited from relatively strong demand in Europe and Asia this year.
“Particularly at the moment when we’re seeing producers in some of those regions, like Europe, for example, suffering from higher energy costs . . . that’s opened the door for Chinese steel producers,” Hynes says, adding that there were some signs in recent months of a softening in global demand.
Last week, the price of iron ore regained some of its previous losses, rising above US$100 ($147) per tonne. So far this year, the spot price has dropped more than 30% from US$144 per tonne in early January.
Write to Oliver Gray at Mining.com.au
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