China’s finished steel export volumes rose by 23% m-o-m to 6.458 mn t in Jun ’21 as against 5.27 mn t in May, as per Chinese customs data.
Steel exports witnessed a sharp increase of 75% y-o-y to 6.458 mn t in Jun ’21 in comparison to 3.70 mn t seen in the same period last year.
SteelMint analyses factors driving up China’s exports
1. Seasonally weak period starts with monsoons: The monsoon season starts in the Asian region by June and continues till September. Heavy rainfall and related issues bring on restrictions in logistics and construction activities in the country leading to reduced domestic consumption.
2. Under-performing auto segment: China’s automobile production fell by about 5% m-o-m to 1.943 million units in Jun ’21 amid global shortage of semi-conductors (processor chips). Auto sales stood at 2.015 million units in Jun ’21 as compared with 2.128 mn t a month ago, according to data released by the China Association of Automobile Manufacturers (CAAM) on 12 Jul ’21.
3. Higher steel production: In the first five months (Jan-May ’21), China’s crude steel output rose by 13.9% y-o-y to 473.1 mn t, as per World Steel Association (WSA) data. Firm downstream demand and higher profit margins despite continued efforts of the Chinese authorities to curb steel production led to the surge in output. The government is firm on driving the country towards carbon neutrality by the year 2030.
Outlook
Recent developments in China indicate a lower drive for exports in the upcoming month due to:
- Continued air of uncertainty over an exports tax policy.
- The Chinese government is looking to cut steel production in CY ’21. Thus, mills might have to cut around 60 mn t of output volumes to keep the current year’s production in line with that of CY ’20’s.
- Increased investments by the government to propel domestic consumption post-monsoon.
Also, China has been facing increased competition from Indian steel manufacturers in the South East Asian markets.
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