JIUJIANG, CHINA – JUNE 17: A worker produces seamless steel gas cylinders for export in the workshop of Sinoma Technology (Jiujiang) Co., Ltd. in Jiujiang, Jiangxi Province, China, on June 17, 2024.
Wei Dongsheng|Visual China Group|Getty Images
Industry observers say China’s steel exports will soon hit an eight-year high before sweeping tariffs sweep through and drag down the industry by 2025.
As the largest steel exporter, China accounts for approximately 55% of the world’s steel Production. This year, China’s steel exports have grown significantly and are expected to exceed the 100 million tons mark, the same level as in 2016.
Strategists at Macquarie Capital predict that China’s steel exports will reach 109 million tons this year and fall to 96 million tons by 2025. play a role”. the investment bank told CNBC.
Their forecasts were echoed by analysts interviewed by Citigroup. Ren Zhuqian, an analyst at steel consultancy Mysteel, said in a Citigroup report this month that starting next year, China’s steel shipments will be “biased downward” due to anti-dumping measures.
Amid domestic oversupply, foreign markets are particularly important as China’s economy grapples with a protracted housing crisis and slowing manufacturing activity.
my country’s steel export volume increased by 26% year-on-year in September 10.2 million tonsMonthly output exceeded 10 million tons Last clicked in June 2016. Export growth in the first nine months of this year Annual increase of 21.2% to 80.7 million tonsThat’s according to last week’s customs data.
After hitting a record high of 112 million tons in 2015, The country’s steel exports had been declining for years before starting to improve in 2020.
Since then, steel export growth has accelerated, driven by insufficient domestic demand, although China’s overall export growth slowed sharply in September despite a series of disappointing data pointing to a weakening economy.
Anti-dumping “Wac-A-Mole”
The flood of cheap steel from China has fueled concerns among its trading partners about unfair competition from domestic steelmakers. More and more countries have stepped up anti-dumping measures, including imposing high tariffs.
Chim Lee, senior analyst at the Economist Intelligence Unit, said steel producers in importing countries have been “under tremendous pressure”, especially those in Southeast Asia and the Middle East.
Thailand expands anti-dumping In August, the United States imposed a 31% tariff on hot-rolled coil (high-strength steel used in critical infrastructure construction) from China. Mexico imposes nearly 80% tariffs Tariffs were imposed on some steel imports from China late last year.
this month, brazil government A 25% tariff is imposed on all steel products from the country. In August, Canada announced a 25% surtax on Chinese steel products. Effective Tuesday.
Tomas Gutierrez, data director at consultancy Kallanish Commodities, said such protectionist measures tend to have a short-lived impact as steel exporters take “circumvention” measures such as transiting through third countries to get rid of the Chinese label.
We see a “whack-a-mole” situation: when one country begins restricting steel imports from China, Chinese steel producers may redirect it to another country until that market also imposes new trade restrictions.
Li Jian
Senior Analyst, Economist Intelligence Unit
But Gutierrez said Vietnam’s ongoing anti-dumping investigation of hot-rolled coils could undermine China’s export momentum because it “affects the substantial growth of China’s steel production.”
Vietnam is China’s main importer of steel, accounting for about 10% of China’s steel consumption. National Steel Export By 2023, according to the Mysteel report. Other key destination markets include Thailand, India and Brazil.
Last month, the Indian government Tariffs range from 12% to 30% Regarding some steel products imported from China and Vietnam, Anti-dumping upgrade Tariffs imposed on Chinese steel last year.
“We’re seeing a whack-a-mole scenario,” said Chim of the Economist Intelligence Unit. The tariffs caused Chinese steelmakers to turn to alternative markets “until that market also imposes new trade restrictions.”
U.S. President Joe Biden’s administration called for triple tariffs on Chinese steel in April, and Republican presidential candidate Trump said he might increase tariffs on Chinese goods by 60% if re-elected next month.
But the impact of these threats from Washington will be quite limited because less than Accounts for 1% of China’s steel exportsValued at $85 billion, it will be shipped to the United States in 2023.
Reduced demand
for the first time in six years world steel association This month it forecast that domestic steel demand in China would account for less than half of global demand this year, citing a “continued slump” in the country’s property sector.
EIU’s Chim said China’s property-related steel demand may not materially improve until 2025 or 2026, as Beijing tries to curb the supply of new homes while clearing existing housing stock.
Chim said new construction starts, the most steel-intensive part of the real estate construction process, will continue to be very weak.
At the same time, he added, state-led infrastructure investment increasingly shifting away from roads and rail and toward energy infrastructure was unlikely to fill the gap left by housebuilders.
More domestic steelmakers have cut production due to poor profitability from steel sales. almost Three-quarters of China’s steel companies Reporting losses in the first six months of the year, many companies are at risk of bankruptcy.
In September, China’s medium and heavy plate hot-rolled coil production fell by 5.4% from the previous month and 6.4% from the same period last year. According to S&P Globalwhich cited official customs data.
Amid escalating trade tensions, Spokesperson of the General Administration of Customs of China It said that most Chinese steel products are to meet domestic demand, but then said that due to the industry’s continuous innovation and product upgrades, hard-rolled coil “will have broad appeal in overseas markets”.
Possible tax hit
Beijing’s possible crackdown on VAT could make matters worse for China’s steel industry.
Steel mills have come under pressure from regulators this year amid accusations they evade taxes to lower export costs.
Luo Tiejun, vice president of the China Iron and Steel Industry Association, said relevant departments have set up an investigation team to severely crack down on these “illegal” steel exports. at last week’s meeting.
Gutierrez said: “If China really follows up (the investigation), the competitiveness of China’s exports will be greatly reduced and the export volume may decline.” But the government may not yet have “confidence” in this.
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