Weak Chinese domestic demand resulted in increase of steel export from the country to India by 40% as compared to last year.
Sluggish Demand
China, world’s largest steel manufacturing economy, is hit hard by waning domestic demand. Chinese steelmakers are currently dealing with overcapacity in their production units. The manufacturers reduced production as steel prices fell record low, following property and infrastructure slowdown.
Export Flood
The last six months of 2015 have seen significant fall of more than 35% in HRC prices. In order to meet its demand-supply mismatch, China is flooding foreign shores with cheap exports. China’s flat steel export from Jan’14 to July’14 was recorded at 23.37 MnT whereas, from Jan’15 to July’15 it increased to 27.38 MnT.
Total steel exports from China to India increased by more than 40% as compared to previous year. From Jan’14 to July’14, total steel export to India was recorded at 1.59 MnT, whereas during Jan’15 to July’15 the same was recorded at 2.26 MnT.
Plummeting HRC Prices
HRC prices in China’s domestic market have fallen by more than 35% since Jan’15. And, there has been fall of more than 30% in China’s HRC export prices. As per trade sources, currently, 2.5 mm HRC is being offered in the range of USD 300/MT FOB China main port.
Source: SteelMint Research
Currently 2.5 mm HRC is being offered in the range of USD 315-320/MT, CNF India basis from China whereas USD 360-365/MT, CNF India basis from Japan and Korea. After Yuan’s depreciation, Chinese exporters have lowered down their export prices further. Indian importers have limited their bookings for HRC for October shipments due to weakening of Indian currency and anticipation of safeguard duty on hot rolled products. .
Uncertain Prospects
Although the Chinese government has injected USD 21.90 billion in to the inter-bank market followed by cut in lending interest rate and reserve requirements as a part of pro-growth policies. The market sources believe that these policies are aimed to revive plunging Chinese equity market and will not aid steel manufacturers. The banks there are not willing to extend new loans to already loss making steel manufacturers. Thus it is likely that demand-supply mismatch will compel Chinese players to lower down their prices further in coming months.
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