China’s steel sector has bigger worries than Biden tariff hike
Steel consumption in the world’s second-largest economy is poised to shrink again this year as a protracted property crisis has yet to find botom
US President Joe Biden’s push to triple tariffs on Chinese steel imports strikes a mostly symbolic blow on an industry facing bigger concerns over faltering local demand and threats of even stronger blowback against China’s surging exports.
Steel consumption in the world’s secondlargest economy is poised to shrink again this year as a protracted property crisis has yet to find botom and as infrastructure demand growth slows ater 12 indebted regions were ordered to halt certain projects.
The state-backed China Metallurgical Industry Planning and Research Institute (MPI) forecasts a 1.7% drop in China’s steel demand this year, following a 3.3% decline in 2023.
While China’s steel exports last year climbed more than a third to their highest since 2016 at 90.26 million metric tonnes, about 9% of its total crude steel output, just 598,000 tonnes of the shipments went to the United States. That was down 8.2% from volumes shipped to the US the previous year and less than 1% of total Chinese steel exports worth $85 billion in 2023.
China, the world’s biggest producer and exporter of steel, is just the seventh-largest shipper of steel to the US, sotening the blow of Biden’s proposal to raise to 25% the tariffs imposed by his predecessor Donald Trump on certain steel and aluminium products. “We do not think there will be any big impact as the main destinations for China’s steel exports are Japan, South Korea, and Middle East countries,” said an analyst at a China-based steel trader who declined to be named as he was not authorised to speak with media.
Spurred by low local prices, Chinese steelmakers and traders are on track to match or surpass last year’s exports, with domestic information provider Lange Steel liting its forecast to more than 100 million tonnes for 2024 ater March shipments beat expectations.
China’s cheap steel products are also stoking complaints from beyond the United States.
Late last year, India imposed anti-dumping duties on some Chinese steel imports while Mexico announced a nearly 80% tariff. Thailand has launched a probe into Chinese rolled steel imports, and Brazilian steelmakers are urging their government to impose a 25% tariff on imports.
A report from a Chinese state-backed research agency identified a total of 112 statements from countries regarding anti-dumping and anti-subsidy moves on Chinese steel products in 2023, a rise of around 20 from 2022.
“We are expecting more trade frictions this year,” said David Cachot, research director at consultancy Wood Mackenzie.
Beijing’s latest support for the sector, a plan to back equipment upgrades in the industrial and farm sectors and speed consumers’ replacement of cars and home appliances, is unlikely to fully offset reduced steel consumption from the property sector.
Consultancy CRU Group forecast that an additional 8 million to 9 million tonnes of steel demand will be created over the next four years thanks to the policy. In comparison, the state metallurgical institute expects construction demand to decline 20 million tonnes, or 4%, this year.
Some analysts said they expect infrastructureled steel consumption this year to grow just 1% to 2%, from previous expectations of 7% to 8%, ater Beijing’s demand that a dozen regional governments delay or halt some state-funded infrastructure projects prompted other regions to follow suit.
In recent years, Beijing has imposed caps on steel production both to reduce supply and curb carbon emissions, and industry watchers and insiders say further output cuts are needed to curtail overcapacity.
“The steel industry faces a conspicuous contradiction -strong supply capability and dwindling demand,” Luo Tiejun, vice chairman of state-backed China Iron and Steel Association (CISA), told an industry event this week in southern China.
“The key to address this is that leading producers take the lead in reining in production pace based on demand,” Luo said, according to the group’s Wechat account.
In March, Chinese steel exports climbed to 9.89 million tonnes, the highest for a month since July 2016, bringing the first-quarter total to 25.8 millions even as overall exports in the world’s second-largest economy contracted sharply.
Valued at $20.3 billion, China’s first quarter steel exports averaged $789 per tone, far above local prices averaging 4,145 yuan ($572.30), data from customs and consultancy Mysteel show.
A weaker-for-longer yuan against the US dollar, partly due to delayed US Federal Reserve interest rate cuts, is also expected to facilitate steel exports.