China’s steel exports fell sharply in the Jan-May period while imports surged on the back of robust steel demand in China and sluggish economic performance of major steel trading nations.
Cumulative exports during Jan-May was lower by 14% y-o-y at 25mn t while imports gained by 12% in this period to 5.46 mn t. In May, export was down by 23.4% at 4.4mn t while imports gained by 30.3% at 1.28mn t, according to customs data.
China’s steel exports have decreased over the past five years due to growing domestic demand for construction and infrastructure projects, elimination of over 150mn t/yr in blast furnace capacity and anti-dumping duties levied on Chinese imports in several countries including the US and India. Steel imports into China have posted a growth this year after declines over the past few years.
Both the decline in exports and gain in imports this year is largely the result of asynchronous economic recovery of China and other countries. Most countries are still reeling from the economic shock of lockdowns to control the Covid19 spread while China has managed to revive economic activity at a faster pace, leading to increased demand for steel products.
Output and demand has fallen in several major steel trading nations such as Turkey, the CIS, Korea and Vietnam. Slower demand at home has made these countries push more shipments into China, particularly billet and HRC. Imports of these two products into China have accelerated since the second half of 2019 as higher domestic prices opened up import opportunities.
Increased domestic demand for steel has also boosted prices in China, denting export competitiveness. On Jun 18, the export price for China-origin HRC was $450-470/t on a CFR basis while Indian HRC was at $445 CFR, Japanese HRC was $460 CFR while CIF price of HRC SAE1006 from Vietnam was $455-465.
China’s steel imports are likely to increase by 7% this year to 13mn t while exports may post a 15% drop to around 53mn t.
Domestic demand revives
Steel demand in China gained strength from April as projects that were shuttered in February and March, when Covid19 infections peaked, restarted in April and May. Onset of summer in June typically slows steel demand, though imports may still rise this month.
The implementation of stimulus measures in China have also started to take effect, with faster growth rates of infrastructure and real estate construction. Flow of capital in the Chinese economy is adequate which may lift steel consumption further in the second half of 2020 and support prices.
Total apparent steel consumption during Jan-May grew by 3.3% to 391 mn t, with the growth rate in May at 6.3%. In May, key steel using industries grew at a fast clip boosting demand for steel products. Automobile output gained by 18.2% y-o-y, excavator sales increased by 68% and new construction area for commercial real estate posted a 2.52% rise in area terms.
Steel sales had started increasing in March itself and posted sharp y-o-y growth in April and May, according to a prominent Chinese steel trading platform.
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