China's Long Steel Export Plunges to Half in 2017

The year 2017 witnessed significant drop in China's steel exports especially in case of long products. While country's steel exports hit record of 112.4 MnT in 2015 amid slumped domestic demand, it dropped to 108.5 MnT in 2016 on account of government's announced production cuts.

However, in 2017 China's total steel shipments fell sharply to 75.3 MnT, a drop of 31% against previous year. Out of the total steel exports, percentage share of long steel in 2017 stood at around 32% which was around 46% in the previous year 2016. Also if we look at the actual numbers, the country's long steel exports in 2017 stood at around 24.4 MnT which was 46.5 MnT in 2016, a drop of 51% on y-o-y basis.

The reason that can be attributed to such a dramatic fall in country's long steel exports is the Chinese government's directive to cut down obsolete steel units (largely induction furnace) that manufactured low quality steel (especially long products) and were non-compliant with government's pollution norms.

In time span of two years, 2016 and 2017, China was able to cut crude steel production capacity of 115 MnT/year and elimination of 120 MnT /year of scrap-fed induction furnace steel capacity. Due to this country's steel demand, which had begun to recover in 2016 on the back of higher real estate sales, has risen further this year boosting domestic prices and eroding the incentive to export.

In Dec'17 China announced cut in export taxes on some of the steel products expressing government's intentions to boost exports in coming year. Amongst all the steel products on which tax cut was announced, long products were benefited the most as the export tariffs on the same were reduced to zero.

However, any increase in steel exports as a result of tariff cuts is less probable in the first quarter of 2018, as the winter heating season has enforced closures (from Nov'17 to Msr'18) in the four provinces adjacent to the cities of Beijing and Tianjin, further promoting production cuts of 14 MnT. Also, post March any dramatic increase in long steel exports in unlikely against the backdrop of increased domestic demand of long steel from country's construction sector.

Along with China, long steel exports of countries like Russia, South Korea, Japan, U.S., Ukraine, and Turkey have also registered fall in 2017 against previous year.

China's Loss; India's Gain

While majority of countries registered fall in their long steel exports, India's long steel exports registered an increase of 54% from 2.31 MnT in 2016 to 3.55 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 targeted its exports majorly to south-east Asian and African countries as these countries fetched good realisations.

In 2018, India is likely to continue the growth in its long steel exports amid absence of Chinese material from the overseas market.

Long Steel Export in 2017

Export numbers include rebar, billet/bloom and slabs export
Quantity in MnT
Source: Customs
e: Estimated