It is reported that Chinese steel exports saw dramatic change in 2008 since export tonnages experience both brilliant surge in H1 and swift and sharp drop in H2.
As per report, January to November steel exports totaled 53.09 million tonnes down by 3.2% YoY. While imports reached 14.46 million tonnes during the same period, down 1.07 million tonnes or 6.9% YoY. Top five export destinations are South Korea, the United States of America, Vietnam, Italy and Saudi Arabia in terms of export tonnage.
Evidently, 2008 is a good year for Chinese steel exports, however, most exporters are not optimistic in 2009.
1. Global economy slowdown has led to a severe drop in steel consumption. South Korean Steel Association has already forecast an evident decrease in steel demand in 2009. Japan also sees little possibility of increase. Eurofer pointed out in its 2009 steel consumption analysis that there would be no recovery in steel demand till Q3.
While such emerging economies as Middle East countries also have cut investment in construction due to substantial drop in oil prices. Inventories of imported rebar are said to have exceeded 1 million tonne and it takes at least four to 5 months to digest. Further, World Steel Association did not give its forecast for global steel demand in 2009 and just concluded that its growth would not be lower than that of GDP.
As a matter of fact, many institutions have been expecting a 5% decrease in world steel consumption in 2009. In face of such a sluggish market, steel makers have already cut output to prevent oversupply. For example, ArcelorMittal planned to reduce production by 35 million tonnes or 35%.
2. The appreciation of C versus other currencies has set a barrier for Chinese steel exports. USD/CNY saw almost no increase since June 2008. By comparison, the currencies of steel export destinations have seen remarkable depreciation with USD among others, KRW, EURO and Dong lost 40%, 19% and 10% respectively. In addition, Malaysia, Philippines, India, Ukraine, Turkey and Russia also has witnessed a deprecation of 14%, 20%, 26%,40%, 30% and 17% respectively for their currencies. This not only weakens the purchase ability of some importers and has resulted in less competitiveness of Chinese steel products in Middle East area.
3. Export policy is also not in the interests of steel exports for instance, Chinese wire rod and rebar exports are levied 15% tax.
4. Trade protection measures taken by other countries would bar steel imports from China. For example, imports of Chinese fasteners into EU would be levied 87% anti dumping tax though its own analysis illustrate that the increase of such steel products has not hurt producers in the destination. Such a measure is more likely to be driven by politics. Other countries would also follow step to take measure to protect their own steel industries.