Domestic Demand Slump in China Puts Overseas Exports at Stake
European Tariffs Raised but... Price Competitiveness Even with Lower Tariffs
Even Inside China, "A Long and Cold Winter Awaits"
China, the world's largest steel producer, is expected to record the highest steel export volume in eight years this year as it increases steel exports due to sluggish domestic demand. Concerns are emerging both domestically and internationally as steel oversupply continues.
According to Chinese consulting firm MySteel on the 1st (local time), China's steel exports this year are expected to reach between 100 million and 101 million tons. This is the highest level since 2016 and the third highest ever.
China accounts for more than 50% of global steel production, making it the largest steel producer. However, despite a decline in domestic demand due to the real estate crisis and other factors, production has not been reduced, leading to oversupply. Chinese steel companies are responding by exporting excess production at low prices to Southeast Asia, Europe, and other regions.
Ian Roper, commodity strategist at consulting firm Astris Advisory Japan, said, "China is supplying steel worldwide and lowering prices," and predicted that countries will retaliate to protect their domestic steel manufacturers from China. He said more trade lawsuits against China are expected in the coming months.
The United States tripled tariffs on Chinese steel this year, and the European Union (EU) launched an anti-dumping investigation on Chinese tin-plated steel products in June. Canada announced tariffs on Chinese steel and aluminum last month. Emerging market countries such as Mexico and Brazil have already raised tariffs this year, while Vietnam and T?rkiye have started investigations to establish grounds for imposing tariffs. Mori Takahiro, vice president of Nippon Steel, the world's fourth-largest steel company, recently told Bloomberg that he is urging other companies and the Japanese government to impose tariffs to protect the industry.
Colin Richardson, head of steel at commodity price data provider Argus Media, said, "There will be a surge (in exports) in the coming months," noting that Chinese hot-rolled coil exports have increased over the past 12 months.
Europe imposed a high tariff of 18.1% on Chinese steel, but despite the additional tariffs, Chinese hot-rolled coil prices have fallen enough to remain competitive. The spot price of hot-rolled coil in Europe has dropped 20% compared to early this year.
Concerns are also rising within China as steel oversupply continues. The Ministry of Industry and Information Technology (MIIT) halted approvals for new steel plants last month. The China Iron and Steel Association criticized domestic steel manufacturers last month for relying on price wars to increase market share and urged them to stop excessive competition. According to the association, the Chinese steel price index fell to its lowest level in eight years as of the 16th of last month.
Daniel Hines, senior commodity strategist at ANZ Research, said that although Chinese steel producers benefited from strong demand in Europe and Asia this year, signs of weakening global demand have appeared in recent months.
Baowu Steel Group, the world's largest steel manufacturer, also warned last month that the steel industry will face a "long and cold winter" more severe than in 2008 and 2015.
According to official Chinese government statistics, Chinese steel companies recorded a cumulative loss of about 2.8 billion yuan (approximately 527.5 billion KRW) from January to July this year. According to MySteel, only 1% of Chinese steel mills are profitable.
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