China’s finished steel exports reached 5.053 million mt in August, slipping 11% from July, China’s customs data showed Sept. 7.
The country’s steel shipments fell for the second consecutive month as efforts to curb exports gathered pace in the country.
Market participants said they expected the export downtrend to continue for the rest of this year, as overseas demand is seen weakening amid fresh COVID-19 outbreaks.
Another major factor halting export growth potential is widening output cut orders received by major Chinese steelmakers, which have been verbally informed by government authorities to maintain their 2021 exports at par with 2020 levels, according to sources.
Cutbacks in steel exports are part of China’s plans to keep its steel production in 2021 at 2020 levels, as it looks to cap iron ore prices and cut carbon emissions. To discourage steel exports, China also removed steel export rebates in May and July.
Consecutive fall in exports
China’s slower exports in August follow a similar monthly decline seen in July, when shipments plunged 12% from June levels, according to customs data.
August exports were 37% higher on the year, but this was mainly due to a lower base seen in the second half of 2020, when most export markets were facing a series of lockdown restrictions.
Over January-August, China’s finished steel exports rose 32%, or 11.547 million mt, on the year, to 48.104 million mt.
Some major steel mills have largely trimmed export quota to both overseas clients and traders for the rest of 2021, as their exports from January through August have largely exceeded the year-ago levels, according to some traders and mill sources.
If China wants to cap its 2021 steel exports at 2020 levels, exports over September-December must be maintained below 5.567 million mt in total, or 1.392 million mt/month, according to S&P Global Platts calculations based on customs data.
However, China’s finished steel exports were unlikely to drop below 2 million mt/month, which equates to over 8-9 million mt during September-December, due to supply commitments to long-term strategic clients and overseas projects, a market source said.
Fresh COVID-19 outbreaks overseas have dented demand for Chinese steel recently, which have contributed to the decline in steel exports as well, according to some traders. A stronger domestic market has discouraged traders from purchasing material from the spot markets and they have been avoiding re-exports, trade sources said.
Steel imports on rise
Meanwhile, China’s finished steel imports in August were at 1.063 million mt, up 1% on the month, but still 53% lower on the year, customs data showed. Imports over January-August were 22% below the year-ago levels, at 9.46 million mt, due to a higher base in 2020.
As a result, net finished steel exports were 3.99 million mt in August, up 177% on the year. Net exports over January-August were also up 59% on the year, at 38.644 million mt.
Some traders expected billet imports may slightly increase in the following months, but overall steel imports were unlikely to rise significantly as domestic demand is expected to remain soft because of China’s slowing property sector for the rest of 2021.