- Steel exports drop in first half but June sees 17% increase y-o-y
- Tepid demand, inventory pile-up keep iron ore, coal imports down
- H2 may see demand rebound in steel, raw materials
Morning Brief: China saw an across-the-board decline in its exports of steel and imports of steel, iron ore and coal in the first half (January-June 2022), official data reveals. Only the month of June saw steel exports rise, goaded by a Covid-induced lack of domestic demand.
China’s steel exports in the January-June, 2022 period or first half (H1) dropped 10.50% y-o-y to 33.46 million tonnes (mnt), revealed data from the country’s General Administration of Customs.
In June, however, China’s steel exports rose 17% y-o-y to 7.56 mnt. It may be mentioned that compared to May, exports in June were however, down 3%. May export volumes were the highest in H1 at 7.76 mnt.
Overall exports dropped in H1 because of the conscious policy adopted by the country to limit exports of commercial grades and focus mainly on value-added steel exports.
However, the Covid surge in the latter part of H1 forced severe lockdowns. This impacted domestic steel consumption heavily, forcing mills to take recourse to exports to keep their cash registers ringing. China entered the overseas market in a big way with the onset of Covid with aggressively low offers.
Also, the Russia-Ukraine war led to steel supply disruptions in Europe, encouraging China to sell substantial volumes of slabs to the EU and flat products to Vietnam at highly competitive prices.
Steel imports decline
China’s steel imports over January-June 2022 stood at 5.771 mnt, a y-o-y decline of 21.5%.
In June, imports comprised 791,000 tonnes, a y-o-y drop of 36.8%.
The Covid surge as well as the summer off-season (high temperatures in the north and heavy rains in southern region) hit consumption badly in China, leading to a drop in imports, overall.
Iron ore imports drop in H1
China’s iron ore and concentrates imports from January to June, 2022 touched 535.75 mnt, down 4.4% y-o-y. June saw imports of the raw material at 88.97 mnt, a marginal y-o-y dip of 0.5%.
Overall iron ore demand had taken a hit because of the decarbonization-induced crude steel production cutbacks, pandemic surge and severe off-season drop in consumption. Sluggish orders and high levels of steel inventories squeezed margins of mills and made them opt for lower grades of iron ore as well. In fact, China’s steel inventory peaked from 8.6 mnt in the first week of January to almost 17 mnt in the first week of March, and had remained above 14 mnt till the second week of June, reveals data compiled and maintained with SteelMint.
Coal imports drop over Jan-Jun
China’s coal and lignite imports in the January to June period dropped 17.5% y-o-y to 115 mnt.
In June alone, the country imported 18.98 mnt of coal and lignite, a y-o-y decrease of 33%.
Imports of the fuel fell amid production cutbacks, higher global energy prices, cheaper domestic material and weak demand amid China’s zero-Covid policy that impelled draconian lockdowns. Imported coal prices, both coking and thermal, rose to record levels in H1, spurred by panic buying by the European Union as it labours under unprecedentedly high energy prices. Moreover, rainy weather weighed on coal consumption at power plants.
Outlook
China is still signalling subdued demand, as denoted by its domestic rebar prices on the Shanghai Futures Exchange, which fell below RMB 4,000/t recently, after a long time.
However, many feel the subdued demand is on account of seasonal vagaries and that consumption will bounce back in the second half, buoyed by a slew of government policies aimed at kickstarting an infrastructure boom. There are indications of an infrastructure investment fund worth RMB 500 billion ($74 billion) to be floated in the third quarter.
In such an eventuality, the second half may see a boost in steel consumption while exports may drop so that the steel remains available for the domestic market. Resultantly, iron ore and coal imports may also rise.
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