China's steel exports hit 2nd-highest peak over Jan-Nov'24. 2025 may see trade probes impact
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- Exports cross 100-mnt, surpass 2023 levels
- Volumes fall 17% m-o-m, but may recoup
- Importing countries actively mulling barriers
Morning Brief: China's steel exports crossed the 100-million tonne (mnt) threshold in January-November, 2024 (11MCY'24), clocking 101.30 mnt, as per data recorded by China's Customs and maintained with BigMint. The volume also surpassed 2023's 90-odd mnt.
The exports are the second-highest ever, playing catch-up with the peak of 115 mnt recorded in 2015.
However, on a m-o-m basis, Chinese steel exports hit a hurdle, falling 17% to 9.28 mnt in November, 2024 from 11.18 mnt seen in October.
SE Asia remained the largest steel importer from China in January-November, 2024 with volumes rising 26% y-o-y to 31 mnt (around 25 mnt in CPLY). But, the m-o-m decline was 20% with all the countries in this region recording declines. Vietnam saw the steepest m-o-m drop of 47%.
Middle East & Africa saw y-o-y volumes climbing up a healthy 27% but the pace slowed towards the year-end with a m-o-m decrease of 9%. Only the UAE and Egypt recorded 29% and 18% m-o-m increase respectively.
Chinese steel exports to East Asia saw a modest 8% y-o-y growth while m-o-m volumes fell 23%.
Month-wise, although Japan saw a modest 12% increase, the rest, including Korea, recorded declines.
South Asia witnessed a 24% increase in January-November to 6.35 mnt (5.13 mnt) but a steep 52% drop m-o-m amid political unrests in Pakistan and Bangladesh and India's safeguard initiatives.
Factors that impacted exports
Sustained domestic demand decline: The sustained slowdown in domestic steel demand continued through the year, squeezing mills' margins and forcing maintenance shutdowns. The slide in real estate sector investments continued y-o-y, over 11MCY'24, the decline was -9.9% on average against -7.8% in CPLY. Infrastructure investment growth showed a y-o-y and m-o-m decline. Over 11MCY'24, it fell to 5.26% from 7% in CPLY.
China's steel industry continued to incur losses over January-October, with the cumulative deficit reaching RMB 23.3 billion. However, the loss narrowed compared to the RMB 34.1 billion recorded in the first nine months, as per Mysteel Global. Encouragingly, the Chinese steel sector returned to profitability in October for the first time this year amid slightly improved market conditions as new policies took effect.
However, exports are the main option to keep the cash registering jangling. The two back-to-back stimulus packages in September and November saw a spurt in sales and prices but which was short-lived. In fact, the stimulus possibly encouraged mills to increase crude steel production m-o-m, which rose almost 2.5% to 78.40 mnt. The output increase catalysed exports further.
Declined export offers give an edge: Chinese steel export volumes have touched their second-highest level, but, at a cost. Despite squeezed margins, mills have seen their offers for benchmark hot rolled coils (HRCs) declining to $519/t FOB in 11MCY'24 from $595/t in the same period last calendar, giving them an edge over other exporting countries. In comparison, in 11MCY'24, Japanese offers averaged $549/t FOB and India's $569/t FOB with intermittent exits from the market.
Developing countries sustain demand: Even though m-o-m, Chinese exports have declined, with most of its heavy buyer countries showing a negative trend, the coming year may usher in renewed buying as some of these are developing and seeing frenzied infrastructure construction. Thus, the long-term steel demand trend will remain intact. As per the Vietnam Steel Association, domestic demand is expected to increase by over 6% in 2024 while construction steel demand may climb up 8% amid a recovery in this segment from late 2023.
Where MENA (Middle East and North Africa) is concerned, worldsteel predicts a 6% increase in steel demand in the Gulf Cooperation Council (GCC) region, and 4% in North Africa. This uptrend is expected to sustain next year and beyond too on the back of a construction, real estate and housing boom as well as non-oil investments like cities, transportation, nuclear reactors, and myriad other mega developments running into trillions of dollars.
Outlook
The Chinese steel market is poised for challenges in 2025, with subdued demand in construction and potential growth in non-construction sectors driven by targeted policies. Thus, exports will remain crucial for mitigating weak domestic performance.
But, countries where China is dumping steel are becoming proactive in putting up barriers. For instance, India is working on a safeguard measure. Vietnam launched dumping probes while Turkiye ended up imposing some measures against the dragon. In fact, 2024 saw 24 investigations launched against Chinese steel exports.
Plus, a more pro-active US and Europe's CBAM will impact the Chinese onslaught in the long term.
