China's finished steel exports up 30% y-o-y on soaring global demand in (Jan-Feb) CY '21

China's finished steel export volumes jumped by 30% annually in the first two months of CY '21 (Jan-Feb) at 10.14 mn t, as per the data released by the General Administration of Customs, China (CGAC). Slow domestic demand and improvement in overseas demand with the global economies recovering from the COVID pandemic towards the end of CY '20 pushed the export volumes high at the beginning of CY '21.

SteelMint analyses the factors for the surge which are mentioned below:

1. Rebound in HRC demand post-COVID-19- The global trades came under pressure with the COVID-19 contagion spreading out at a global scale in late Jan '20 and stringent a lockdown was announced in China. However, with the CY '20 coming to an end, most of the economies had recovered from the impact which led to a surge in overseas demand for HRC.

2. Absence of Indian HRC cargoes- India remained inactive in the Southeast Asian region and focused mainly in the Gulf (U.A.E.) and EU countries due to higher price realizations. Also, the other major exporting nations like Japan, Russia and South Korea focusing on their domestic economies. Thus Vietnam importers were majorly procuring HRC from China which in turn resulted to surge in the nation's exports.

3. Export activity picked up post-Lunar New Year holidays- Nation's export activity picked up after the week-long gap of Lunar year holidays. Vietnam (a major importer of HRC from China) actively booked HRC from China post-Tet holidays. This nation's HRC volumes increased in Jan-Feb '21.

Short term outlook-

The Chinese mills started raising their offers since the beginning of Feb '21 due to possible export rebate to cuts. Along with this, a surge in freight costs by the shipping companies also led to increased offers. This may lead to a further surge in Chinese HRC export offers in the near term. On average, monthly export offers for HRC (SS400) reached $665/t FoB basis in Feb '21 which was around $654/t FoB China in Jan '21. Meanwhile, export volumes are expected to increase further due to firm demand in the overseas markets.