It is reported that China''s iron ore and steel products imports both soared up in recent period triggered by the relatively lower import prices, which again dragged down China''s steel market, which has shown temporary sign of upturn in the year start, and weighed on those big mills equipped with self ore mines.
1. Flooding in steel imports weigh on China market
China''s steel exports tumbled amid the import rises in the first quarter. And experts from Angang Group policy research center attribute the import & export reversal to the price differential. Steel prices in global market have fallen sharply and below domestic steel prices since January.
For example, prices for HRC exported to China from CIS posts at USD 490 per tonne in January compared with USD 550 per tonne in domestic market, and the price spread is widening. India, Korea and Australia etc also joined the low-priced export club to China since March.
Mr Zhang Xiaogang chairman of Beijing Angang Group said the climbing steel imports are mainly happening in East and South China, the major steel consumption places in China and a place of strategic importance for home big mills.
And the rise starts to ripple into North and Northeast China. Steel imports, sales revenue and total profit of Angang all posted more or less declines in the Q1 due to this reason.
The surging steel imports will impact domestic steel market in the following aspects.
(i) It will exaggerate the market imbalance
(ii) The rising imports are certain to force home mills into low price competition, further reducing the profitability of the latter.
(iii) The rising import of high value-added products would press down the prices sharply at home and dispel home mills'' initiatives in developing these products.
2. Rising ore imports impact mines-possessed steel mills
Iron ore imports also surged up amid the crude steel production cutback in China in the first quarter, with combined imports reaching 131.47 million tonnes up by 18.8%YoY from a year ago of which, imports in March hit a record of 52.08 million tonnes up by 46.2% on year.
The falling imported prices and rising tonnages deal a heavy blow to a slew of major state-run steel mills in Northeast China''s Liaoning province who are mainly depending on self-produced low-grade ore for steel production.
Global ore giants have given up the policy of arresting price falls by slashing output and started to offer discounts to promote sales in China which sent the prices for the metal from last year''s peak of CNY 1,500 per tonne to CNY 500 per tonne to CNY 600 per tonne.
Mr Zhang said the promoting sales would crowd out the market shares of domestic ore, and further raise up China''s dependence on global iron ore and hurt China''s steel industry''s pricing power in annual ore talks.
To counter the tough situation, some steel mills and experts in Liaoning suggest enhancing products and market development to form technical advantage. Meanwhile, steel mills should tie up with customers to prevent overseas imports from seizing domestic market shares. Meanwhile, relative government bodies should launch probes and intervention to those steel products eyeing soaring imports. And Beijing should hammer out supportive measures for key ore miners to ensure their healthy development.