In September 2024, China witnessed a significant surge in steel exports, reaching an impressive 10.15 million metric tons, marking a 25.9% increase from the same month the previous year. This rise is notable as it represents the highest level of steel exports since June 2016, according to the latest customs data. However, despite the increase in volume, the average price of exported steel has fallen by 11.62% year on year, indicating challenges within the sector.
The export growth comes at a time when the Chinese steel industry is grappling with severe overcapacity, primarily due to a prolonged slump in the domestic real estate market. The construction sector, which historically accounted for around 35% of domestic steel consumption, has seen a dramatic slowdown. New home starts in China plummeted by 22.5% year on year as of August, forcing steel manufacturers to pivot towards overseas markets to absorb excess production.
China produces over half of the world’s steel, largely utilizing it in construction, infrastructure, machinery, and automotive sectors. As domestic demand continues to wane, the push for exports is not only an economic strategy but also a potential flashpoint for international trade tensions. The first eight months of 2024 saw China exporting a total of 66.818 million metric tons of steel, a staggering 31.8% increase year on year. However, the value of these exports has decreased by 10.7%, reflecting market pressures.
Major destinations for Chinese steel exports include Vietnam, South Korea, and Indonesia, with Vietnam alone accounting for 10.25% of total exports. Economists, including Yan Liang from Willamette University, note that the current export trends expose a structural problem within the industry, particularly concerning low-end steel products. While high-end steel production may not face similar overcapacity issues, the market's shift toward exports indicates a strategic move by manufacturers to navigate domestic challenges.
As exports rise, so too does the scrutiny from other countries. In 2024, China has faced 28 trade investigations from various economies, including the European Union, the United States, and Malaysia, primarily focused on allegations of unfair trade practices linked to steel overcapacity. This stark contrast to only two investigations in the previous year underscores the escalating international concerns surrounding China’s steel production practices.
Analysts and industry experts advocate for continued regulation of steel output, particularly in alignment with carbon emission targets. The need for mergers, acquisitions, and technological improvements to phase out uncompetitive low-end producers has never been more pressing. Recent reports indicate that approximately 95.7% of 247 surveyed steel enterprises in China are currently operating at a loss, a situation that necessitates significant industry reforms.
To address these issues, the China Iron and Steel Association convened a meeting to discuss the overcapacity crisis, emphasizing the importance of tackling so-called "zombie capacity", inefficient enterprises that persist due to government subsidies. As the industry strives to adapt to these pressing challenges, the future of China’s steel exports remains a topic of intense scrutiny, both domestically and internationally.
