China's Flat Steel Export Plunges While India Sets Record for Highest Export in 2017

Flat steel trade in seaborne market noticed a transitional change in 2017. In this article we have analysed the flat steel exports of China, Japan, India, South Korea, U.S., Russia and Ukraine during Jan-Oct'17.

Out of all the steel products that are manufactured and exported by steel-producing countries, flat steel products usually constitute a major percentage in the share of exports.
The domestic demand for flat products in China and Japan recovered in the year 2017 resulting in decline in their export numbers subsequently. However, India's flat steel exports registered a dramatic increase this year owing to good realisations in the overseas market especially in Southeast Asian countries.

Along with India; Russia and U.S. flat steel exports also increased in 2017 against previous year.

Flat Steel Exports 2016 vs 2017 (from Jan-Oct)

Quantity in MnT
Source SteelMint

China's supply and demand side analysis

In the first 10 months of 2017, the flat steel exports from China registered a fall of 7.9% against the corresponding period of previous year from 40.2 MnT to 37.0 MnT. There are two major reasons from supply side that contributed to the fall in China's flat steel exports.

As China continued to deal with its problem of overcapacity in the steel sector, the government issued directives in Jan'17 to cut down obsolete steel units (largely induction furnace) that manufactured long steel. Due to this several large mills shifted their focus on production of long steel resulting in lower availability of flat steel for exports. Secondly, the Chinese government had directed mills in key producing regions to operate at 50% from Nov'17-Mar'18 in order to have clearer skies by controlling smog.

From consumption side, the domestic demand for steel especially from construction sector surged in China this year owing to economic stimulus package and infrastructure programs announced by the government. Thus, the production cuts coupled with increased domestic demand led to the manufacturers focusing more on domestic market and lesser exports.

Improvement in Japan's domestic steel demand

Japan's flat steel exports also registered a fall of 10.2% from 23.5 MnT to 21.1 MnT Y-o-Y basis during the first 10 months of 2017. This fall in Japanese flat steel exports can also be attributed to recovery in country's domestic demand from construction and automobile sector compelling Japanese steel manufacturers to focus more on domestic market. Ukraine's and South Korea's flat steel exports registered a fall of 14.3% and 1.42% respectively on Y-o-Y basis during the period under study, while Russia's flat steel export increased marginally by 0.78%.

China's export fall proved to be India's gain

India's flat steel exports registered highest increase of 114.9% from 3.74 MnT in first ten months of 2016 to 8.04 MnT in 2017. This increase can be attributed to the fall in Chinese steel exports, the contraction of which led to opening up of overseas markets which were until now dominated by Chinese exporters. India majorly increased its exports to south-east Asian and African countries as these countries gave good realisations. U.S's flat steel exports also increased by 22.3% during the period under study as like India, U.S. too took advantage of falling Chinese exports and increased its exports subsequently in the foreign market.

As per SteelMint analysis, Chinese steel exports are likely to remain muted in the first quarter of 2018 as the winter heating season has enforced closures in the four provinces adjacent to the cities of Beijing and Tianjin (from Nov'17 to Mar'18). Indian flat steel manufacturers are likely to benefit from the absence of Chinese material in the overseas market and are anticipated to record an increase in their flat steel exports in the coming year.