China's Surging Steel Exports Raise Trade Concern

Steel commodities play a major role world over, influencing economies and shaping industries globally. However, recent trends in China’s steel exports have raised concerns in the international markets, exacerbating trade tensions and prompting quick responses from governments across the globe.

The numbers themselves show a vibrant scenario. China, the world’s top steel producer with production share of 55%, witnessed a sharp surge in exports, reaching nearly 26 million tons in the first quarter of this year (January-March 2024) alone. This marks a 28% year-on-year increase.

This surge occurred against the backdrop of domestic challenges, notably a property crisis dampening demand within China. While Asia remains a primary market for Chinese steel, there has been a sharp uptick in shipments to regions like India, the Middle East, and Latin America.

Spurt in Chinese Exports: A Threat to Global Markets

As the export booms, the consequences have risen as trade frictions are intensifying across the globe.

In the United States, President Biden is pushing for tariffs of up to 25% on specific Chinese steel products. This is being done as part of a broader strategy to counter what the U.S. perceives as Chinese overcapacity across various industries.

Similarly, countries like Brazil, Colombia, and Chile are grappling with the resurgence of China’s steel exports.

Major Buyers of Chinese Steel

In Brazil, Chinese steel exports surged up to 30% in the Jan-March 2024 period compared to the same time frame of previous year.

Additionally, Colombia and Chile experienced significant increases in Chinese steel imports, prompting the implementation of trade measures to do away with the importing trend.

For instance, Chilean steelmaker Cap SA reversed its decision to shut down the plant, after the government imposed tariffs on select Chinese products.

Higher Capacity and Production Spurt Chinese Steel Exports

The roots of China’s spike in steel exports lie in the nation’s mammoth production capacity. China has consistently produced over 1 billion tons of steel annually since 2019. However, a downturn in the country’s construction activity has left many Chinese mills contending with excess capacity.

To adapt, some mills have shifted their production from construction products to hot-rolled coils (HRC), which enjoy a broader market share both domestically and internationally.

China Set to Introduce New Taxes on Steel Exports

Concerns persist over methods used in facilitating steel exports, with analysts warning of tax schemes favouring Chinese traders.

Calls for crackdowns on illegal exports method stress the need for stricter measures to curb exports.

With China selling more steel abroad, understanding global trade is becoming harder. Thus, China plans to impose new export taxes on specific steel goods to combat tax evasion.

Reports suggest that the Chinese officials are serious about enforcement, prompting cautious reactions from trading companies. As a result, fresh contracts now feature cancellation clauses for missed deadlines of exports of the material amidst anticipation of new export tax announcements.

It was also noted that, amidst this export tax news, Taiwanese buyers are closely monitoring the situation before making additional purchases from the Chinese suppliers.

Will Chinese Steel Exports Remain Strong?

Despite the expected announcement of additional taxes on Chinese exports, the industry players believe that the major importers of steel worldwide will remain affected by Chinese exports.

The higher Chinese production and low domestic consumption due to the poor performing construction industry will push steel makers to deal more with global buyers to maintain margins and demand-supply in the country. Hence, immediate relief to the world from Chinese steel is less likely.

Get latest steel news, market updates, and price trends on OfBusiness.