China's 30% decline in steel exports in 2017

2018-05-02_CN_steel_export_destination-

China's steel exports to the top 10 destinations declined owing to trade-action taken by the governments of destination countries.

The value of steel exports remained largely unchanged, owing to a sharp increase in prices for construction steel during 2017, seemingly a bubble, which began to falter in Q1 2018. Cause of the price rise was the closure of previously unrecorded capacity of ca. 100 million tons, largely turning out allegedly substandard construction steel products, which were sold at discount prices, keeping the overall construction steel price level low.

The removal of this capacity for cheap products allowed the remaining steel mills to raise their prices, and since construction steel in China was about 50% of the overall market, the overall impact on steel pricing was sharp upturn. This upturn was further propelled by steel futures, leading to excesses which are expected to normalize in 2018.

Overall crude steel capacity, however, remains stubbornly high at around 1.2 billion tons (acc. to the National Development & Reform Commission), while domestic demand of crude steel, expected to be 730-750 million tons in 2018, may drop to 625 million tons in the years to come (acc. to China Iron & Steel Association).

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