BEIJING: China’s steel exports have hit a record level this year at over 100m tonnes, illustrating how the country is relying on global sales to help reduce its surplus production.
Rising Chinese exports of processed raw materials from steel to aluminium have helped pushed commodity prices down to their lowest level in almost a decade, hitting shares of global miners and steel producers.
A weaker Chinese currency is likely to help exporters in the country even further. The renminbi traded at a four-year low on Wednesday, after the People’s Bank of China cut its reference rate to the lowest level since 2011.
The country’s total steel exports rose 22 per cent in the first 11 months of the year to 101.7m tonnes, data show. In addition, China’s Ministry of Finance said Wednesday it will cut export taxes on steel billet from 25 per cent to 20 per cent.
“China’s steel production is being cut only very slowly and not nearly at the pace needed to rebalance the Chinese nor the global markets,” said John Kovács, an analyst at Capital Economics. Chinese steelmakers have been offering attractive prices in euro terms this year, according to Mr Kovács.
Chinese exports are now 50 per cent larger than the entire US domestic production of steel, according to Macquarie. The bank forecasts Chinese exports remaining at more than 100m tonnes a year until the end of the decade. As a result it does not see the steel price recovering until then.
Weak steel prices have hit margins of global steel producers, which have now returned to levels not seen since the early 1990s, according to Macquarie. Global steel demand is also likely to fall 1.7 per cent this year, according to the World Steel Association.
“The global steel industry is bankrupt. It’s a case of how painful the process has to be for a restructuring,” Colin Hamilton, an analyst at Macquarie in London, said. China’s steel exports have led to growing trade tensions, but analysts say tariffs are not enough to balance the market.
Immediate action is needed to address the challenge of excess global steel capacity, industry and government officials at the OECD’s Steel Committee said after a meeting this month. They forecast that global steelmaking capacity is likely to continue growing to 2.4bn tonnes in 2017.
The US is also due to announce results of three anti-dumping investigations against hot-rolled steel coil, cold-rolled coil and coated products over the coming three months, according to Jefferies. Data this week also showed that China’s exports of aluminium rose almost 15 per cent in November from a year earlier.
