Chinese steel manufacturers have exported a total volume of 53.65 mn t in (Jan-Dec) CY ’20, down by 17% in comparison with 64.35 mn t in CY ’19, as per the data released by the General Administration of China’s Customs (GAC). However, Dec ’20 volumes which stood at 4.85 mn t registered an increase of 11% m-o-m and 4% annually.
SteelMint analyses the factors for decline as below:
1.Emergence of COVID-19-
Stringent lockdown in the country from Jan to mid-Mar ’20 disrupted both overseas and domestic trade activities. COVID-19 turned into a pandemic by mid-March spreading across the globe hindering overseas activities.
2.Production curbs-
Tangshan province Government ordered the suspension of blast furnaces and sintering equipment from 1 Jul ’20 until 30 Sep ’20 to check air pollution. Furthermore, Autumn and Winter production curbs were announced in late Aug ’20 to reduce pollution levels. The curb shall remain effective from Sep ‘20 through Mar ’21. The Tangshan Govt. announced further restrictions on production from 24 Sep. to 7 Oct. to ensure blue skies during the national day festivities in Beijing. The same was extended until 31 October, cutting the blast furnace, sintering, and pelletizing operations by 50% for mills falling under the C category.
3.Robust demand in the domestic market-
In China, domestic buying remained active as the supply remained tight owing to the frequently announced production cuts. Also, a strong futures market and higher price realization in domestic sales prompted Chinese steelmakers to shift the focus on domestic supplies over exports.
4.Govt. announced stimulus packages–
Economic stimulus announced by the Beijing Government for housing and infrastructure sectors to recover from the COVID-19 pandemic’s blow resulted in higher output. Furthermore, the optimism seeped into other allied sectors as well resulting in robust domestic market demand.
5.Increased overseas competition-
The Chinese exporters faced fierce competition from India, Russia, South Korea, and China during the Mar-Jul ’20 months. The competitive offers issued to MENA, Southeast Asia, and European regions from the rival exporters weighed on the export volumes of the country significantly over this period.
6.Higher export offers-
The Chinese average monthly HRC export offers showed a continual ascent to the highs of $647/t FoB China in Dec ’20 from the lows of $405/t FoB basis in Apr ’20. The recovery in the domestic market demand led to increased consumption and better realizations. This further reduced exports over the year.
Outlook- The export volume from China is expected to increase at a gradual pace in the upcoming months with robust downstream steel industry demand in Vietnam. Further, the Chinese mills will continue to dominate the export market with other key exporting nations catering to their recuperating domestic markets.
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