The flood of steel that mills in China are pushing onto global markets fell in October from a record amid rising trade frictions and weak overseas demand, signaling that what’s been a safety valve for the world’s top producer may now be starting to close.
Outbound cargoes of steel shrank 20 percent to 9.02 million metric tons last month from September, according to customs data released on Sunday. That was the lowest figure since June, and below the monthly average so far this year of 9.21 million tons.
“The slump in steel exports last month compared with September reflects rising trade frictions for Chinese products,” Helen Lau, an analyst at Argonaut Securities (Asia) Ltd. in Hong Kong, said after the release of the data, which showed overall exports from the country dropped for a fourth month. “There have been complaints in Asean, Europe and recently the U.S.” about Chinese steel, Lau said.
China’s mills, which account for half of global production, have exported unprecedented volumes of the metal this year to help counter contracting demand in Asia’s top economy. The surge has undermined prices and increased competition from India to Europe and the U.S., spurring complaints that the trade is unfair. While down on-month, China has still shipped 25 percent more steel this year than in the same period of 2014.
The global steel market is being overwhelmed with metal coming from China’s state owned and state-supported producers, a collection of industry groups including the American Iron and Steel Institute said on Thursday. The next day, ArcelorMittal cut its full-year profit target, citing exceptionally low Chinese export prices.
Cases against Chinese steel imports are surfacing worldwide. Last week, the U.S. Department of Commerce said it planned duties of 236 percent on imports of corrosion-resistant steel from five Chinese companies. More than 20 cases have been lodged against China’s cargoes, with about seven from Southeast Asia, according to the South East Asia Iron & Steel Institute.
“Steel exports have encountered headwinds as both trade friction and weak demand overseas have led to reduced appetite for Chinese products,” said Zheng Ge, an analyst at Wanda Futures Co. in Beijing. Financial markets and many businesses were closed Oct. 1-7, which may have contributed to the drop, said Xu Huimin, an analyst at Huatai Great Wall Futures Co. in Shanghai.
Given the October break, some mills may have brought forward orders to September, so exports that month were high while October’s figure was small, according to Argonaut’s Lau. Maybe mills wanted to slow exports to avoid frictions, she said. Citigroup Inc. said on Monday it was maintaining its forecast of 100 million tons for net shipments in 2015.
Inbound cargoes of iron ore shrank 12 percent to 75.52 million tons last month from September, according to the customs figures. Purchases totaled 774.5 million tons in the first 10 months, little changed compared with the same period a year earlier.
Iron ore stockpiled at Chinese ports rose 1.5 percent to 86 million tons in the week to Nov. 6, according to Shanghai Steelhome Information Technology Co. Ore with 62 percent content delivered to Qingdao was at $48.21 a dry ton on Friday, 32 percent lower this year, according to Metal Bulletin Ltd.
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