China is poised to achieve its highest steel exports this year since 2016, with analysts attributing the success to the weakening yuan and competitive pricing. The country, known as the world’s largest steel producer, is capitalizing on overseas demand as it grapples with weak domestic market conditions.
China’s steel industry has been significantly impacted by the prolonged slump in its massive property sector, leading to three-year lows in steel prices in May. However, robust demand primarily from Asia and Africa has helped stabilize inventories and enable mills to maintain operations.
Customs data revealed a 41% increase in steel exports during the first five months compared to the previous year. Traders have also reported a recent upswing in international buying interest. Analysts predict that exports in 2023 could easily surpass last year’s figure of 67.32 million metric tons, with estimated volumes potentially reaching 77 million metric tons.
Pei Hao, a senior analyst at international brokerage FIS based in Shanghai, explained that a weaker yuan and attractive export prices were key factors behind the surge. The yuan has depreciated by nearly 5% against the U.S. dollar since the beginning of this year.
In May, steel exports reached 8.36 million metric tons, the highest since September 2016. However, their value was 27.5% lower compared to the same month last year, amounting to $7.7 billion or an average of $922 per metric ton, according to customs data.
Traders highlighted strong demand from Southeast Asia, the Middle East, and Africa, where higher energy costs make China’s steel prices more competitive than local production. Additionally, the resumption of China-backed construction projects abroad following COVID-related travel restrictions contributed to increased exports.
Li Peng, a purchase director at the International Corporation of the Third Construction Co. Ltd, a subsidiary of state-owned China State Construction, noted the robust demand for flat and sectional steel products from Indonesia due to projects invested in by Chinese companies.
The significant export volumes during the first five months, coupled with reduced steel imports during the same period, prevented a surge in domestic inventory levels, despite underwhelming domestic demand. Data from consultancy Mysteel revealed that stocks of five major steel products stood at 15.44 million metric tons on June 21, the lowest since mid-January and 30% lower than the corresponding period last year.
While steel exports might decrease in June, two steel traders expect a resurgence in July and August, citing increased inquiries from Southeast Asia and South Korea.
Tomas Gutierrez, head of data at consultancy Kallanish Commodities, pointed out that the growing exports are adversely affecting foreign producers. He stated, “On export markets, the impact is very bad. Overseas markets are already struggling, and increased imports in many regions have forced down local production.” According to the World Steel Association, steel output in Asia and Oceania declined by 6% in May compared to the previous year.
India is contemplating imposing countervailing duties on steel imports from China, following the application of an anti-dumping duty on stainless steel imports last year.
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