China’s steel exports are predicted to exceed 100m tons

STEEL exports from China would surge to more than 100 million tons this year as local mills benefit from cheap iron ore to produce more than Asia’s top economy needs, according to Cliffs Natural Resources.

“It’s like a bad virus,” Lourenço Gonçalves, the chief executive of the largest US iron-ore producer, said in Cleveland. “Australia continues to give iron ore to China almost for free, allowing them to produce more than they need.”

Shipments from the biggest producer are headed for a record this year, as slowing local demand prompts mills to seek overseas buyers, driving down prices and spurring trade tensions from the US to India.

At the same time, the largest iron-ore mining firms, including Australia’s Rio Tinto Group, are boosting output to expand sales. China’s steel shipments were called extraordinary by Credit Suisse, which said last month that they were now in line with total output from Japan, the second-largest producer.

“What China is exporting alone is bigger than the secondbiggest producer of steel in the world: it is crazy,” Gonçalves said on Wednesday. “With the massive sales of iron ore to China – enabling China to produce a lot more than China actually needs for consumption – there’s a glut of exports.”

Shipments of steel from China surged 9.5 percent to 9.73 million tons in July, according to customs data. In the first seven months, exports rose 27 percent to 62.13 million tons, the highest ever for the period, data show.

Exports from China are forecast to expand 21 percent to 111 million tons this year, according to a projection from Colin Hamilton, the head of commodities research at Macquarie Group. That compares with 53 million tons in 2013.

Cliffs also owns iron ore mines in Australia that Gonçalves is seeking to sell.

He took the helm in 2014 after an activist-investor revolt, promising to end Cliffs’ vulnerability to the oversupplied seaborne market.

Cliffs’ stock fell 80 percent in the past 12 months as iron and steel prices tumbled. The shares fell 0.4 percent to $3.37 at 10.25am in New York yesterday.

Rio and BHP Billiton have defended their policy of expanding output into an oversupplied market.

Rio’s Sam Walsh said in February that if it cut output, forfeited supply would be made up by rivals. Alan Chirgwin, the iron-ore marketing vice- president at BHP, said in May that the mining firm’s strategy was rational.

Iron ore with 62 percent content delivered to Qingdao fell 1 percent to $55.84 (R720) a dry ton yesterday, according to Metal Bulletin. While prices rose 25 percent since bottoming at $44.59 on July 8, a record in data going back to 2009, they are still down 22 percent this year. In 2014, they lost 47 percent. – Bloomberg