China's steel exports hit a new record after 7 years as domestic demand slumps
Steel NewsDate: 12-07-2023 by: Ngan Le
China's steel export output is forecasted to reach a record level in the past 7 years when the export volume from January to May has reached 36.4 million tons. The declining domestic demand and the depreciating currency have encouraged manufacturers in this country to promote exporting to deal the inventories.
China's steel export is predicted to hit a new record in 2023
Recently, some analysts indicated China will reach the steel export milestone in 2023 with an output in the range of 66-77 million tons, this is the highest milestone for 7 years ago. Specifically, in the time of period from January to May 2023, China's steel exports reached 36.4 million tons and increased by 41% over the same period last year. This development trend is expected to continue until the end of the year. It is possible that the total export volume of China by the end of 2023 will increase by 10% compared to 2022.
Customs data shows that China's steel exports in May reached 8.36 million tons, which is the highest figure since September 2016. There are also some predictions that steel export volumes may decrease in June but very quickly it will grow again in July and August due to strong demand coming from Korea and Southeast Asian countries.
China’s steel export volume is likely to hit a new record in 2023
The reasons for China's steel exports surge
Some of the reasons for the sudden steel export output in this year come directly from the weakening domestic demand and the decreasing of the yuan. The chaotic domestic steel industry has forced steel producers in China to shift exports to overseas markets with higher demand in order to deal with inventories.
Production increases but domestic demand weakens
China's real estate began to weaken in 2022, this recession dealing a strong affection to domestic steel manufacturers because the construction sector has always been the largest steel consuming sector. Construction projects in the real estate sector here from January to May have decreased by more than 7% compared to the same period last year.
On the other hand, steel production output has reached the optimal level, at the end of June, blast furnace utilization rate (BAF) among 247 steel mills reached 92%, this is an all-time high number since 2021 to present. The constant increase in productivity while the demand from real estate is weakening has made the factories here look to export as a solution to reduce the inventory load.
The Yuan depreciates
The yuan has depreciated by nearly 7% against the US dollar since the beginning of the year. The fall renminbi exchange rate has brought opportunities for steel exporters in China as the export prices will be cheaper and provide them some advantages with the other manufacturers abroad. Beside that, the low price steel from China producers brings competition to other exporting countries.
Consumption demand increased in some areas
In the context of the global economic recession, which has significantly affected the demand for steel in many countries. However, there are still some countries in the Middle East and North Africa that have shown strong consumption in the half of 2023. Currently, Middle Eastern countries are gradually investing in infrastructure projects to boost the economy instead of depending on oil as before, so the amount of steel imported from China entering this region has grown very strongly.
The inflation situation in countries in Southeast Asia has made it easier to import Chinese steel because the price is extremely cheap. In addition, the demand for steel in some countries in this region is also boosted by some infrastructure projects sponsored by China contractors. However, Vietnam was out of the forecast because the demand for steel in Vietnam in May decreased by 15% compared to the previous month, the reason coming from the slow construction activities and projects.
Some regions have high steel importing from China
Some risks of trade remedies from China's steel exports
The growth in China's steel export generated concern for many steel producers in other importing countries due to fierce price competition. Some experts say that Chinese steel export shipments are harming foreign manufacturers because increased steel imported volume will force domestic steel mills to reduce output.
India - a new power in global steel production is considering imposing countervailing duty on steel imports from China. In 2022 last year, India imposed anti-dumping duties on Chinese stainless steel pipes to protect the profits of domestic steel producers.
Vietnam's steel industry proactively responds to trade competition
The increasing steel production along with a favorable price can produce some advantages in exporting but it can also bring trade defense lawsuits. China is considered the world's largest steel producer today, but in fact this country is facing a lot of investigations and a series of anti-dumping decisions from other countries.
Vietnam is also a new potential country in the field of steel production, Vietnamese steel products are not only present in the Southeast Asian market but also in Europe and America. However, the rapid increase in export volume means that many other countries will pay attention and domestic steel products will face anti-dumping lawsuits in the future.
Facing the risks of trade remedies, the Vietnam Import-Export Department in recent years has promptly established agreements signed between many countries, including Free Trade Agreements (FTAs) such as the Vietnam Trade Union Agreement (FTA) and the Vietnam Trade Union Agreement (FTA); the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Vietnam-EU FTA (EVFTA)... have opened up great opportunities for Vietnam's steel industry to export more easily.