IHS Maritime 360 – Chinese steel exports meet with resistance

Access the original article

2 November 2015 – Exports may be providing some relief to China’s oversupplied steel industry but protectionistic reactions by receiving countries may become a hurdle, said Italian shipbroker Banchero Costa.

China’s steel exports went up by 27.2% year-on-year in the first nine months of the year, as the country found a way out for its oversupplied steel industry.

The country exported 83.1 million tonnes of steel from January to September, as its steel industry in China remains under tremendous pressure this year, among weak demand, falling prices, and poor profitability.

China produced 607 million tonnes of crude steel in the first nine months of 2015, according to the National Bureau of Statistics. This was relatively unchanged over the same period of last year.

Steel demand over the last two years has been very weak, driven by a year-long slump in the housing market, which accounts for at least 45% of steel demand.

Steel prices have been significantly affected, with rebar now at a 26% discount compared to 12 months ago.

Sales margins of steel producers are now extremely low, even though they are still benefitting from low raw material

(iron ore and coke) and energy costs (due to low thermal coal prices).

Exports last year were also benefitting from a tax loophole on boron-added steel products. This has been removed this year, but mills were looking to win a fresh export rebate by adding chrome to their products.

Banchero Costa remarked, “Above all, exports are simply price-competitive on the international market, and exporters have been strongly targeting emerging regions such as South East Asia, India and South America.”

Most steel product exports from China where shipped to Asian destinations such as South Korea, Vietnam, the Philippines, Thailand, Indonesia, India, and Malaysia, although smaller volumes ended up as far away as in South America, Europe and the United States.

The deciding factor will be the availability of demand from international markets. There has already been quite a lot of backlash from importing countries against Chinese supposed ‘dumping’, with some countries threatening or implementing additional import duties.

For example, the Indian government announced in September of this year a provisional 20% safeguard duty on certain categories of hot rolled steel products for 200 days.

This was in response to calls by the country’s ship recycling industry, as the influx of cheap Chinese imports hit demand for scrap steel.

The products to be affected by the duty accounted for more than half of the steel imported into India last year. Previously, steel producers have successfully lobbied to get duties imposed on specific steel products however they did not apply to imports from Japan and Korea due to trade agreements.