MNI: China Steel Export Growth Seen Slowing In 2024

Growth in China’s steel exports will slow this year from last year's 36.2% as authorities restrain mills from chasing low-profit foreign sales even as domestic demand remains weak, an advisor and local researchers told MNI.

Last year’s exports hit 90.3 million tonnes as mills seeking to maintain employment diverted output abroad while increasing overall production to 1.019 billion tonnes from 1.013 billion tonnes in 2022. Authorities may use carbon emission regulations to restrict output this year, said Wang Yongzhong, head of international commodity research at the Chinese Academy of Social Sciences.

Chinese steel exporters have benefitted as falling iron ore prices negated India’s cost advantage from having its own domestic iron ore supplies. Lower domestic coking coal costs have also cut Chinese steel production costs, said Zhou Fuhan, ferrous metal analyst at Nanhua Futures.

But middle eastern countries and Turkey are now increasing output, which will substitute for Chinese exports, said Zhuo Guiqiu, a ferrous metal researcher at Jinrui Futures, adding Chinese domestic demand should remain weak as the property market continues to underperform, boding ill for steel prices with inventories of the metal also high.

Further export growth will be harder from last year's high base, said Zhou.

CHANGING FISCAL RESPONSE

While state-driven infrastructure spending has provided support for steel consumption in the past, much of this year’s increased fiscal outlay, financed by CNY3.9 trillion in special bonds and CNY1 trillion in ultra-long-term special treasury bonds, will be allotted to sectors which use less of the metal, such as AI and other high-tech. (See MNI: Iron Ore Prices To Fall Further-China Advisor, Analyst)

“China has gradually shifted its focus to tech-based ‘new infrastructure’, as those traditional steel-consuming infrastructures such as railways tend to saturate,” said Wang.

A GF Future analyst said slower-than-usual issuance of government bonds in the first quarter had led to less new project starts and slower construction of ongoing projects, dampening steel demand.

Crude steel export volumes grew by 32.6% in January and February but the total yuan value of shipments dropped 7.2%. Spot prices for China rebar HRB400 at the end of March fell to CNY3330 per tonne from CNY3978 at the year 's start, and Wang said he expected prices to fluctuate around CNY3000 per tonne this year.

The China steel industry PMI fell 1.8pp to 44.2 in March given poor expectations for construction and property demand.

Some 68% of steel exports during Jan-Nov last year went to Asian countries, with Europe taking 6% and North America 3%, according to research firm Mysteel. Demand should also continue to remain strong in Belt and Road countries, Zhuo continued.

The China Iron and Steel Association said last week the industry needs to adapt to market fundamentals and stop low-price dumping.