What Happened
The year 2017 was quite an eventful year for Chinese steel industry. While steel de-capacity promoted all-round structural upgrading in China’s steel industry, country’s steel prices rallied and steel exports slashed significantly.
In an effort to deal with the problem of overcapacity, the Chinese government issued directive to cut down obsolete steel units (largely induction furnace) which manufactured low quality steel and were non-compliant with government’s pollution norms. By the end of 2016, the country was able to curb crude steel capacity of 65 MnT and another 50 MnT by the end of year 2017.
However, these abrupt cuts coincided with a surge in China’s domestic demand for steel (increased by 2-3% Y-o-Y basis in 2017) activated by the government’s own economic stimulus packages. This led to increase in domestic steel prices subsequently.
In order to meet country’s increasing domestic demand especially from construction sector coupled with government directed production cuts, China restricted its exports to foreign countries in CY17. Also trade restrictions imposed by various countries as a measure to protect their domestic steel industry impacted the Chinese steel volumes during the year.
Fall in China’s country-wise steel exports
According to China’s customs data, country’s total steel exports from Jan to Dec plummeted by 30% from 108.4 MnT in 2016 to 75.6 MnT in 2017.
China majorly exports its steel to South Korea, Vietnam, Philippines, Thailand, and Indonesia, contributing to 40% of the country’s total steel exports.
In 2017 it has been observed that China’s steel export to South Korea has declined by 20% y-o-y basis from 14.4 MnT in 2016 to 11.4 MnT in 2017.
China’s steel exports to other countries have also registered a fall in 2017 against previous year; Vietnam (-35%) Philippines (-37% y-o-y), Thailand (-49% y-o-y), and Indonesia (-50% y-o-y).
In terms of volume the country’s steel exports in 2017 to Vietnam stood at 7.6 MnT, to Phillipines at 4.1 MnT, to Thailand at 3.1 MnT and to Indonesia at 2.9 MnT.
The percentage contribution of India in China’s total steel exports stands at around 3% in both 2016 and 2017. However, if we look at the actual numbers, the same has fallen from 3.31 MnT in 2016 to 2.54 MnT in 2017.
China’s steel export outlook for 2018
Chinese government had announced removal of export taxes on many steel products including wire rod, stainless steel and long products with effect from Jan’18 which may result in surge in country’s steel exports in 2018 against previous year. However, Chinese government (as a part of pollution control measures) have also announced production cuts during winter i.e. till Ma’18 which is likely to keep Chinese steel exports subdued in the first half of CY18.
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