Export controls: A production line at a plant of China Baowu Steel Group in Shanghai. China is mostly exporting to nearby economies and nations in South-East Asia, South Asia and the Middle East have seen the biggest increase in imports this year. — Reuters
SHANGHAI: China’s steel exports have shot up. History suggests it can’t last.
Steelmakers in the world’s biggest producer are leaning heavily on overseas sales to soak up a surplus caused by the country’s years-long property crisis.
But they’re running into dumping accusations from importers and a protectionist Donald Trump will soon be back in the White House.
The flare-up in tensions is starting to resemble the industry’s last trade crisis of nearly a decade ago.
Unless Beijing rips up its current playbook and decides to re-inflate the housing market or splurge on infrastructure, then steel consumption in China is in for long-term decline.
But mills have barely cut production to match that reality. The result is near-record exports. Over 11 million tonnes were shipped last month, a nine-year high.
Investors fret that Trump’s re-election will prompt another trade war.
Even though China doesn’t sell much of the alloy to the US directly, protectionism could ripple though the world’s steel markets and choke global trade.
Analysts at ANZ Group Holdings Ltd reckon Chinese mills may try and “front run” any increase in tariffs by boosting exports even further over the next few months, according to a note from the bank last week.
Chinese steel has a history of stoking trade tensions.
Importing countries have opened 25 anti-dumping investigations so far this year, the most since 2016, according to China’s Commerce Ministry. If that period’s any guide, expect sales to drop sharply.
“China’s steel exports may start to decline by the end of 2026 as more trading partners step-up anti-dumping export controls and total steel production falls,” said Bloomberg Intelligence analyst Michelle Leung.
China is mostly exporting its steel to nearby developing economies that still need to build infrastructure at scale.
Nations in South-East Asia, South Asia and the Middle East have seen the biggest increase in imports this year and many are partners in Beijing’s Belt and Road Initiative.
But even those countries are getting swamped and are raising trade barriers in return. That spells trouble for Chinese steelmakers because it indicates just how saturated the market has become.
And it’ll only get more costly for mills if they’re forced to ship further afield.
China’s biggest overseas market is a case in point.
“When Chinese hot-rolled coil exporters look out at the world, they don’t worry about Trump much, they worry about Vietnam,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd.
It’s one of the countries that has pulled up the drawbridge after being flooded with Chinese steel. — Bloomberg
