Earlier this year, China announced plans to curtail its excess steel capacity. The same commitment was reiterated by China several times. However, despite these commitments and friction with several of China’s trading partners, its steel exports refused to die down. In April, China exported 9.1 million metric tons of steel. Although steel exports have fallen compared to March, they have risen 6.4% YoY (year-over-year). So far, in the first four months of the year, China exported 3.7 million tons of steel—a YoY increase of 7.6%.
What does it mean?
China exported 112 million metric tons of steel last year. This is more than what Japan, the second-largest steel producer, produced in the entire year. Higher Chinese steel exports were the key driver of the steep fall in global steel prices last year. However, steel has actually been the best performing metal this year when we look at other industrial metals like iron ore, copper, and aluminum.
Steel outperformed
One of the key drivers of rising global steel prices has been the sharp rise in Chinese steel prices. As the landed costs for Chinese steel products have increased, domestic producers get leeway in raising their spot offers.
Steel producers in the US (DIA) including U.S. Steel Corporation (X), ArcelorMittal (MT), Nucor (NUE), and AK Steel (AKS) also have the advantage of trade actions. Trade cases led to a sharp decline in US steel imports helping domestic producers raise their selling prices several times this year.
Improved global sentiments and higher Chinese steel prices supported steel prices elsewhere also. However, it would be interesting to see how long the steel party can continue with the core issue of overcapacity still not being addressed.
Source: ChinaDaily