China's indirect steel exports may drop sharply - CISA

The growing demand from overseas while their inability to ramp up domestic output with the ongoing COVID-19 pandemic has led to the surge in China's indirect steel export orders so far in 2021, but this may wane once the overseas supply chains recover with the spread of COVID-19 under control, Li Yongjun, an analyst from China Iron and Steel Association (CISA), shared at the CISA's interim meeting with its members in Shanghai over July 29-30.

Machinery, electrical and electronics products have been the pillar in China's exports, and by the end of June, the exports value of such products had already been back to the normal level, accounting for 59.2% of the country's, or gaining 29.5% on year to a total of Yuan 5.83 trillion in the first half of 2021, as reported.

If the overseas economies can control pandemic effectively, their steel industries will be able to recover quickly, according to Li, noting that by the end of June, major steel producing countries had already seen their steel output and the supply chain among their major steel producers back to the pre-pandemic levels, and this may lead to less indirect steel orders from China.

For foreign countries, consumption of steel-contained goods and related imports have also been boosted by the issuance of their domestic currencies while inability to supply domestically in the short term, but in the long run, their domestic manufacturing industry and the supply chain of the steel mills will be boosted and recovered more quickly by the added capital flow, he added.

Besides, many countries may review the sustainability of the existing global supply chain especially during a crisis like the COVID-19 pandemic and may shift towards building up regional supply chains to avoid relying a worldwide supply chain for certain products, Li pointed out.

He added, though, that uncertainties may remain in China's indirect steel exports, as if the pandemic is under control only regionally but not globally, then the needs for China's exports will persist high, otherwise, China may face sharp falls in such exports and also the risk of oversupply in such commodities in the end.

It is wise, thus, for China's related manufacturers to curtail their enthusiasm from expanding their capacities too rapidly, he warned.

Li did not quote any data in his presentation to illustrate his views, and a Shanghai-based analyst expressed a similar view in late July.

For the rest of 2021, China's home appliances sales may lose some steam with limited room for domestic demand to pick up, and exports may be affected by a few factors such as narrowing profit margins on higher production costs, another wave of COVID-19 outbreaks in the overseas economies, and fierce competition from other their domestic supplies and other global rivals, he commented.

China has been the world's top country in indirect steel exports, and in 2019, among the world's total 358.9 million tonnes of indirect finished steel exports, China contributed to 95.8 million tonnes, according to the data from the World Steel Association.

Written by Villanelle Xia, xiayi@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.