Chinese steel exports are at record highs

Our correspondent Suo Hanxue reports from Beijing

Recently, the China Iron and Steel Association (hereinafter referred to as "CISA") released data, is expected in 2023 China's steel exports of more than 90 million tons, in history only lower than the 2014-2016 export scale, imports of about 7.6 million tons.

At the same time as a large number of steel exports, the risk of trade friction has intensified. China Steel Association said that it should be noted that due to the expansion of exports, in 2023, five countries in the world have launched six trade remedy investigations on Chinese steel products, and at the end of 2023, Mexico announced the import tariff of nearly 80% on some steel products in China, steel companies need to be vigilant about the risk of increased trade friction.

Cisa people expressed concerns to the China Business News reporter that the coverage of the EU CBAM (carbon tariff) may be further expanded.

Steel exports are under subsequent pressure

In 2023, supply is obviously stronger than demand to become a sword hanging over the head of the industry, and the imbalance between supply and demand has seriously affected the promotion and sustainable development of China's steel competitiveness.

But the industry is buoyed by good news about exports.

The main factor for the substantial growth of China's steel and steel consumption products exports since 2023 is due to the high quality and low price of China's related products and the strong demand in the international market. In addition, the moderate depreciation of the renminbi against the US dollar has also improved its export competitiveness. In 2023, a large number of steel exports in the country have also largely digested the domestic pressure to increase production and become an important force in balancing market supply and demand.

Wang Guoqing, an analyst at the Lange Iron and Steel Research Center, told reporters that exports of more than 90 million tons is a relatively high figure, and exports in 2022 are about 67.32 million tons, an increase of about 30%.

Wang Guoqing also has a little concern about future changes in the export market. "According to our monitoring, foreign manufacturing has not fully recovered before, so China's exports are better, making up for foreign markets." At present, foreign manufacturing is recovering, and the supply side is slowly recovering. In the first nine months, the decline in supply from foreign manufacturers narrowed. In October and November 2023, supply and demand changed from negative to positive, rising year-on-year. "As foreign mills resume production, steel exports could be curtailed."

Wang Guoqing also pointed out that China's steel prices have a price advantage compared with Turkey and India.

"In 2024, with the recovery of global steel production and the slowdown in steel demand expansion, the overseas steel supply and demand situation will gradually balance, and China's steel export orders will weaken, which will curb China's steel exports to a certain extent." It is expected that China's steel exports in 2024 will face a certain downward pressure, and it is expected that the exports will be about 80 million tons, down about 10% year-on-year." Wang Guoqing said.

The best steel varieties exported this year mainly include carbon structural steel, low-alloy high-strength structural steel, high-quality carbon structural steel, alloy structural steel and so on. These varieties of steel are widely used in construction, machinery, automobile manufacturing and other fields, and the export volume is large.

Not long ago, CISA senior also told reporters that on the one hand, the impact of external demand contraction on the production of China's steel industry has gradually emerged, and indirect steel exports are expected to face downward pressure; On the other hand, international energy prices have risen sharply, and the prices of bulk raw materials remain high, increasing the cost pressure of steel enterprises.

Overall in 2023, China's steel prices are at a low level and domestic competition is fierce. Mainly due to the impact of the global economic situation, China's domestic market demand is insufficient. Competition in China's steel industry is fierce, and major enterprises take various means to reduce costs and prices in order to compete for market share, making steel prices lower overall.

In order to promote economic development and transformation and upgrading, government departments have introduced a series of policy measures to encourage enterprises to improve product quality and technical level and reduce production costs.

It is precisely because of the excessive competition in the domestic market that enterprises seize shares in order to survive, so prices are repeatedly reduced and profit margins are constantly compressed. Thus, China's steel prices occupy a certain advantage in the world.

Increase export costs by 4 to 6 per cent

The scale of exports in 2023 has expanded, and five countries around the world have launched six trade remedy investigations on Chinese steel products.

Trade remedy investigations are measures taken to protect domestic industries from unfair import practices, including anti-dumping, countervailing and safeguard measures.

"First of all, from the point of view of our steel output exported to the EU, in recent years, the EU has repeatedly imposed high tariffs on China's steel on the grounds of anti-dumping, and there are also related quota restrictions, including the impact of the epidemic and other factors." In fact, the total amount of steel exported to the EU in these years is generally showing a downward trend, in 2022, China's cumulative exports of steel is 67.32 million tons, of which only 3.89 million tons of steel exported to the EU, accounting for 5.8% of our total exports, in fact is very small." Cisa told reporters not long ago. "From January to September 2023, China's steel exports to the EU were about 2.85 million tons, down 7.5% year-on-year."

In 2023, the European Union announced that it would implement CBAM, or Carbon Border Regulation Mechanism, also known as carbon tariff, a policy tool for pricing carbon emissions on imported goods. The scheme requires importers in the EU to pay a carbon charge on their imports to compensate for the carbon emissions generated during their production. The purpose of this mechanism is to ensure that the EU's carbon emissions policy is consistent for imported products, thereby protecting European domestic industries from unfair competition.

The UK government has officially announced that it will implement the UK Carbon Border Adjustment Mechanism from 2027.

The implementation of this mechanism will have a certain impact on exporting companies, which will need to deal with additional carbon emissions charges and will need to understand the EU's carbon emissions policy to avoid unfair treatment.

"But in fact, because the industrialization process of various countries is not the same, the EU has completed the industrialization process early, China is still in the process of industrialization, steel production in the process structure of China and the EU is not the same, China and the United States is not the same, so the CBAM implemented by the EU is actually contrary to the WTO fair trade principle," It also runs counter to the principle of common but differentiated responsibilities, which is clearly enshrined in the Paris Agreement." The aforementioned person said, "Of course, in the short term, from the point of view of the amount of steel exports to the EU, this amount is not large, including the amount of carbon tariffs that may be paid, the impact of CBAM on China's steel exports is limited and controllable, but it is undeniable that China's steel enterprises because of CBAM, It will face the challenges of rising costs of steel exports to the EU, shrinking price advantages and declining product competitiveness."

Cisa is more concerned that at present, the coverage of CBAM is further expanding, from the primary products of steel to steel products, including the expansion of carbon prices, so it will lead to China's steel products need to bear higher export costs to Europe. At the same time, we are also considering that other developed countries may also adopt some trade barriers similar to CBAM.