Chinese Steel Exports Rise Along with Worries of Oversupply

Includes: MT, NUE, X
by: Michelle Galanter Applebaum
Chinese December Exports Hit New Record for the Year. December Chinese steel exports rose 17% from November’s level, nearly 150% above the low last May, reaching the highest since October 2008. The uptick in exports and a slight 1% decline in total imports caused net exports to jump by nearly 40% for the month.
Finished Steel Exports Soar; Semi-Finished Imports Drop. December finished steel exports rose 17% to 3.34mt from 2.85mt in November while semi-finished exports fell from 20,000 tonnes to 10,000 tonnes. Finished steel imports rose 15% but were more than offset by a significant decline in semi-finished imports, which plunged from 300,000 tonnes in November to only 9,000 tonnes in December.
Producing for Domestic Demand? We’re disappointed to see the ongoing monthly increases in exports out of China as the Chinese steel industry is supposedly running flat-out due to strength in China’s stimulus, not to seize export opportunities. Even more disconcerting is the average price/ton of exported steel from China, which dropped 1.5% in December from $768/t to $757/t, bucking the trend of rising prices in the region. China saw the opposite trend in their imported steel, with prices rising some 0.6% from November to December.
Outlook. With over 50% of global production in China, the risk of excessive production in the region spilling out into the West remains profound. So far we’ve seen prices in China rising faster than in the rest of the world, and the ramp-up in exports is most probably at least part of the explanation. We remain bullish on global steel prospects, but continue to believe that the risk of Chinese oversupply remains profound.

Author's Disclosure: None