China’s steel exports reached an eight-year high in September, driven by overcapacity issues stemming from a property market downturn and weak domestic demand. According to customs data, overseas shipments of steel totaled 10.15 million tonnes, marking a 25.9% increase compared to the same month last year. Despite the surge in export volume, the price of exported steel fell by 11.62% year on year. In the first eight months of 2024, China exported a total of 66.818 million tonnes of steel, representing a 31.8% increase from the previous year. However, the total value of these exports decreased by 10.7%.
China is the world’s largest steel producer, accounting for more than half of global output, which is primarily used in construction, infrastructure, machinery, and automotive sectors. Historically, the construction industry has consumed about 35% of domestic steel, but ongoing challenges in the real estate market have led to a significant slowdown in construction activities. New home starts declined by 22.5% year on year as of August, prompting steel manufacturers to target overseas markets for their surplus output. The main recipients of Chinese steel exports during this period included Vietnam (10.25%), South Korea (8.71%), and Indonesia (5.25%).
Economic analyst Yan Liang from Willamette University highlighted that the issues in the steel industry are twofold: overcapacity in low-end steel production and stable demand in high-end steel. He noted that the export push could further exacerbate trade tensions. China is currently under scrutiny from various countries due to concerns over its steel overcapacity, with 28 trade investigations launched by 12 economies this year, including the European Union, the United States, Brazil, Vietnam, and Malaysia. In contrast, only two such investigations were initiated during the same period last year.
Steel consultancy Mysteel reported that as of September 6, 95.7% of 247 sampled steel enterprises in China were operating at a loss. The consultancy projects that steel exports may reach 100 million tonnes by the end of the year, the highest level in eight years.
In response to these challenges, the China Iron and Steel Association recently held a meeting to discuss the domestic overcapacity crisis. The association emphasized the need to address “zombie capacity,” referring to unviable enterprises that continue to operate due to government subsidies, and the ineffective removal of outdated production capacity. Addressing concerns about overcapacity, customs spokesman Lu Daliang stated that most of the steel produced in China is intended for domestic use.
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