Chinese finished steel exports rose 30% to 37 million tonnes (mn t) in the first half of 2021 (H1CY’21) against the same period in 2020. Total exports of the materials in CY’20 were at 53 mn t.
South Korea, Vietnam, the Philippines and Thailand were the top buyers in H1CY’21.
Interestingly, all the top importing countries bought nearly or more in the first half compared to what they bought in entire CY’20. For instance, Vietnam imported around 4 mn t in the first six months, almost equivalent to what it had imported in full CY’20. Brazil imported 1.2 mn t in H1 compared to 0.9 mn t in entire CY’20. The largest importer, South Korea’s H1 imports amounted to 4.2 mn t compared to 5.5 mn t in CY’20. The Philippines bought 0.21 mn t compared to 0.29 mn t in CY’20.
Why did imports rise?
Imports rose across the world in H1CY’21 owing to pent-up demand unleashing after Covid-induced lockdowns across Mar-May’21 started easing. Manufacturing had taken a hit across the world. Steel mills and downstream industries were in short supply and had to rely on imports majorly.
However, the Chinese government, in a bid to disincentivise overseas sales of finished items, withdrew rebates on steel exports from May’21, starting with hot rolled coils and more recently cold roll coils, galvanised and silicon steels, rails and other items.
There has already been a m-o-m drop of 12.22% in steel exports in Jul’21 compared to the previous month, as per data from the General Administration of Customs, China.
Way ahead
SteelMint expects China’s steel exports to fall in the second half of 2021 because of measures being adopted to reduce the mills’ exports focus.
For one, the withdrawal of the export rebate is already leading to lower exports as was seen in the Jul’21 figures.
Secondly, the buzz on an expected export tax of 10% and above refuses to die down, which is keeping buyers and sellers on the sidelines. Chinese mills are especially silent, awaiting clear-cut market directions which would help them determine offers.
Thirdly, the production cuts are continuing and leading to reduced allocations from Chinese mills for exports, a scenario that the Chinese government is aiming at.
Lastly, the Covid surge, of late, is keeping the Chinese economy subdued. Severe lockdowns are impacting domestic demand which will also weigh down exports.
These factors point to low export volumes from China in H2.
~Madhumita Mookerji
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