Steel exports' share in global crude steel production seen shrinking: BigMint

• China to play key role in global seaborne trade
  
  
• Increased capacities, protectionism to limit exports
  
  
• Will indirect steel exports increase in long term?
  
  

Morning Brief: The share of steel exports in the global crude steel production pie is seen shrinking, going forward, reveals data maintained with BigMint. The data, tracked since 2010 till 2024, shows, the share of exports has been moving in a narrow range in this period, hovering between 16-22%. Export had a 21% share in 2010, when crude steel production was at 1,435 million tonnes (mnt). It peaked to 22% over 2015-16, thereafter, fell back within a limited 16-19%, despite the fact that crude steel production has grown to hover at 1,880-1,890 mnt since 2019. It had peaked to 1,963 mnt in 2021 with 18% export share.

In 2024, global crude steel output is likely to remain more or less range-bound at 1,890 mnt but the share of exports is estimated at 19%.

Going beyond 2024, BigMint forecasts that the share of exports in the total crude steel pie will gradually decline globally.

Factors that will likely hit seaborne steel trade

Chinese factor to play key role: In 2024, the share of exports is estimated to rise 1% from 18% in 2023 (1,892 mnt). This slight increase would be mainly driven by China's active dumping of steel across importing geographies. In 2023, it accounted for almost 54% (1,019.10 mnt) of the global crude steel output and exported over 25% (90 mnt) of its 340 mnt of steel. Faced with overcapacity amid extremely subdued home demand, thanks to a non-performing real estate sector and slowed infra investments, China has no option but to dump its steel across at predatory pricing. However, going forward, this trend may change due to a few factors. One, the government is actively trying to bring the sagging economy back on track with a slew of booster measures. It is expected that once the Chinese economy recovers, the authorities will start implementing a long-awaited proposal of replacing exports of commercial grades of steel with high-margin value-added products. This would mean, even if export tonnages drop, margins would be higher. Two, significantly, this plan would be aligned with China's future crude steel output cuts, a move that would dovetail with its decarbonisation targets. Three, several anti-dumping investigations are on to stall Chinese steel exports. Once concluded, China may be dealt a blow in its steel exports.

Four, it may be recalled China had exported over 90 mnt of steel in 2023, which itself was almost 5% of the global crude steel output last year. Once China's output drops, export allocations will also dip, and the volume of steel trade may decline correspondingly.

Importing geographies eye capacity expansions: All the major importing geographies are increasingly looking to become self-reliant in terms of domestic crude steel production to serve two ends-protect their domestic steel mills and to preserve precious forex outflow via imports. Southeast Asia, which is China's largest exporting region and was once highly popular amongst Indian exporters too, is looking to expand capacity. The region's current production capacity stands at 75 mnt, but is expected to exceed 160 mnt if all proposed projects materialise.

Middle East, another emerging steel-consuming region, saw its own capacities rising 27% to around 103 mnt in 2023 from 81 mnt in 2019. Africa has seen a 15% increase in capacity build-up to 51.5 mnt since 2019 (45 mnt).

India too will be adding another 12 mnt by FY'25, taking up the total to 184 mnt.

Protectionism to put spanner in steel trade: Alarmed by China's dumping of steel at predatory pricing, several countries are initiating probes against it. The European Union, for instance. The US, on its part, on 13 September, decided to significantly increase import tariffs on Chinese products, including 100% increase in duties on electric vehicles and a 25% tariff on steel and other metals.

Not just China but India and other exporting countries, including Egypt, Japan and Vietnam, too have been brought within the ambit of these dumping probes from the European Commission. Other countries turning the dumping scanner on India include Vietnam, Turkiye, and Malaysia. Protectionism is a potent tool economies will increasingly use to protect domestic industries, going forward.

Outlook

In a spin-off impact of the lower seaborne trade, indirect steel exports may increase in the long term. This will ensure a steel consumption and overseas sales channel for steel mills and exporters globally.