A review of China's steel industry in H1CY23

In the first half of the calendar year 2023 (H1CY23), China's crude steel output increased marginally by 1.3% y-o-y to 535.64 million tonnes (mnt). Production volumes were supported as blast furnace-route steel mills were able to increase their net sales realisations because of lower production costs and higher finished steel prices. For instance, profits from sales of hot-rolled coil (HRC) were higher by RMB 154/t ($21/t) and that of rebars averaged RMB 84/t ($12/t) compared to the previous month.

However, the production seems to be gradually declining from 92.64 mnt in April to 91.11 in June.

China is likely to adopt a few policies (such as flat control) in the second half of the year that will emphasise a flat growth in steel production. The production cuts in H2 will thus balance out the higher production in H1.

China's finished steel exports jumped by 31% y-o-y to 43.58 mnt in H1CY23 as against 33.28 in the corresponding period last year (CPLY). Domestic demand in China has been slower than expected even when production volumes are high along with the depreciation of the Chinese Yen against the US dollar, has made exports attractive to the country's steel producers.

Steel imports into China fell 35% y-o-y to 3.74 mnt in H1CY23 (January-June 2023) as against 5.77 mnt recorded in the year-ago period.

Iron ore & pellet imports rise on higher steel demand

China's iron ore import volumes in January-June, 2023 rose by 7.7% to 576.14 mnt compared to the same period a year ago, according to Customs.

Pellet imports into China surged 38% y-o-y in H1CY23 post-Indian government removed the 45% export duty on pellets. Secondly, because of new production cut policies and extensive de-carb goals, steel manufacturers are more inclined towards pellet imports. China's pellet imports moved up to 12.92 mnt from 9.34 mnt seen in H1CY22. India remained the largest exporter of pellets to China at 3.97 mnt followed by Iran and Kazakhstan with 3.13 mnt and 1.59 mnt, respectively during the period under purview.

Iron ore production by Chinese mills dropped 5% to 476.76 mnt in H1CY22 in comparison with 501.21 mnt in the CPLY.

Coking coal imports surge 75% y-o-y

Imports of coking coal into China witnessed a significant hike of 75% to 45.62 mnt in H1CY23 against 26.07 mnt last year.

Ferrous scrap imports rise 20% y-o-y

Ferrous scrap imports summed up to 0.12 mnt in H1, up 20% in comparison with 0.1 mnt in H1CY22. This rise in imports can be attributed to the acceleration in construction projects across China, which has led to higher steel scrap demand.

Price dynamics

Steel prices in China saw a downtrend during the first half of the year due to the economic slowdown and slower-than-expected demand from downstream industries.

Iron ore: Iron ore fines (Fe62%) dropped from $140/t CNF in H1CY22 to $118/t CNF currently in H1CY23.

Coke: Another steelmaking raw material witnessed 29% de-growth to RMB 2,458/t ($343/t) during the period against RMB 3,444/t ($481/t) a year ago.

Ferrous scrap: Ferrous scrap import prices were down by 21% to RMB 3,002/t ($419/t) compared to RMB 3,809 ($532/t).

Semi and finished steel: All prices showed a downward trend annually. Billet prices were down by 19% to RMB 3,699/t ($517/t) in H1CY23 compared to RMB 4,559/t ($637/t) in H1CY22. Rebars too, lost 18% growth to RMB 3,954/t ($552/t) during the period. Meanwhile, HRC prices were at RMB 4,237/t ($592/t) in H1CY23, down 17% y-o-y.