- Steel shipments to MENA edge up over 20% y-o-y
- Exports to SE Asia largely stable
- Sluggish global demand weighing on exports
Morning Brief: China’s steel exports in January-October, 2022 were recorded at 56.2 million tonnes (mnt) – down 2% from over 57 mnt in the same period last year, as per customs data maintained with SteelMint.
China’s export volumes had peaked in May mainly because of geopolitical instability caused by the Russia-Ukraine conflict. After consuming the increase in exports in May-June, the overseas markets entered an off-season cycle as a result of inflation, the rally in energy prices, and currency devaluation, with downstream demand in Europe, America and South-east Asia showing no signs of improvement.
This accounts for the marginal decline in steel exports in the first 10 months of this year. Even while downstream domestic steel demand in China remained tepid due largely to extended Covid-19 lockdowns, negative sentiments in the property and real estate sector, as well as a lower-than-usual manufacturing index, exports showed no perceptible signs of improvement y-o-y.
China’s exports of steel had weak competitive advantage in prices. Due to the weak competitive advantage of China’s export quotations compared with the CIS countries and countries in South-east Asia, overseas consumers tended to give priority to purchasing steel from other countries. Thus the China’s steel exports continued to decline.
Middle East and Africa
China’s steel exports to the Middle East and Africa rose a significant 23% over January-October, 2022. This geography is emerging as an important export destination for the world’s leading steel producer, as it grapples with a real estate market turmoil, Covid outbreaks, and policy-driven production cuts with the aim of sticking to decarbonisation goals.
The Covid-19 pandemic severely affected the construction industry and associated equipment demand across the Middle East and Africa in 2020. This was primarily attributed to disruptions in the supply chain, reduced investment in new equipment procurement, halt and postponement of construction projects, and unstable economic growth of many countries in this geography.
However, since 2021, the construction industry across the Middle East and Africa has been witnessing significant growth in investment, which is likely to drive the market in future. Rising government investments in infrastructure development in the Middle East and Africa – in Saudi Arabia, Kuwait, Oman, the United Arab Emirates, and Egypt – are propelling steel demand and exports from China.
South East Asia
South East Asia, although it retained its top spot as China’s leading export destination, saw volumes remaining stable at around 16.7 mnt over January-October, 2022 compared to 16.8 mnt seen in the year-ago period. Additional capacities have come up in this geography, many of which are Chinese-owned. End-users are preferring to procure from domestic mills rather than importing. Vietnam’s slow post-Covid recovery, and preference for domestic material have slowed imports. Inflation and liquidity tightening by governments are also keeping demand lower.
East Asia
East Asia, comprising Japan, Korea and Taiwan, saw a 19% y-o-y drop in Chinese steel imports to 7 mnt against 8.7 mnt seen in the year-ago period, although volumes were the third-highest. Japan has been plagued by falling domestic demand due to inflation and the pandemic and has reached a scenario where it is more interested in exporting steel amid a sliding yen. In South Korea, demand recovery in areas like construction and appliances is slow.
Central & South America
Export volumes to this region showed a sharp 29% y-o-y decline to 5.8 mnt in the first 10 months of the current year against 8.2 mnt in the corresponding period last year. Overall, steel demand is expected to decrease in this region. As per a report in GMK Centre, the downward trend in steel consumption Latin America, will continue until 2023.
Europe
China’s exports to Europe over January-September rose 35% y-o-y although overall volumes share in the total remains small. However, China attracts safeguard duties in Europe along with nil quotas. So, under normal circumstances, Europe would not be importing from here, except for semi-finished materials like slabs.
Outlook
SteelMint expects China’s exports to drop in 2022 to 60-62 mnt against 66 mnt in 2021. The Chinese government is discouraging exports of commercial grade steel, focusing instead on high grade/high value materials. Moreover, the country’s aggressive decarbonisation drive will ensure that its steel production will be lower than 2021’s level of 1.03 billion tonnes, with a pronounced focus on domestic consumption.
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