Daily Update: China’s Steel Export Numbers Point to Other Challenges

Today is?Tuesday, April 30, 2024, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global.?Subscribe?to be notified of each new?Daily?Update.?

Steel in China is never just steel. Looking back over several decades, the growth of China’s steel industry mirrors the country’s rise from a developing market to an economic powerhouse. China’s growth as an export leader has depended on the twin pillars of urbanization and infrastructure, both of which require massive amounts of steel. China’s steel industry has expanded to meet the need, now providing over half of global steel production.?

Most Chinese steel is used domestically. But a slowdown in domestic demand, driven by a slumping property sector and local governments downsizing infrastructure projects to reduce their debts, has left Chinese steel manufacturers with excess capacity. Rather than idling plants, some producers have attempted to increase exports by selling steel at or below the cost of production. Steel exports from China can be understood in many ways — they can indicate underlying economic weakness, an industry capable of outcompeting rivals or strong demand from importing countries.?

Steel exports are generally a good thing. It means that a country’s steel industry can produce a high-quality product at a competitive price. China’s net exports of semifinished and finished steel increased 29.8% year over year in March. For the entire first quarter, China’s steel exports were up 35%.?

However, the increase in Chinese steel exports has not been driven by a corresponding rise in global steel demand. This imbalance means that Chinese steel producers' market share is coming at the expense of other industry players. Countries such as Brazil are introducing higher steel tariffs to limit imports and protect domestic steel production. Brazilian steelmakers have actively lobbyed the government for protection against what they describe as a flood of low-priced steel coming from China.

China’s domestic steel consumption fell 13.1% year over year in March, and steel production was down 7.8%. This could indicate some softness in China’s economic recovery. The property sector in China has underperformed for a few years, and many infrastructure projects have also been delayed by heavily indebted regional governments.

The increase in steel exports is one possible indication of a weak domestic economy. Another indication is the increase in iron ore inventories in China. Iron, a key ingredient for steel, is sitting idle in warehouses. China's iron ore port stocks climbed 15% during the first quarter of 2024.

Some Chinese steel manufacturers have pivoted away from producing long steel products that are used in construction, such as rebar, to producing steel flats, which are useful for export. The increase in Chinese steel exports has reduced steel prices across Asia as manufacturers from multiple countries attempt to secure a share of the international steel export market.

Today is Tuesday, April 30, 2024, and here is today’s essential intelligence.

- Written by Nathan Hunt.

Economy

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—Read the article from S&P Dow Jones Indices

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Capital Markets

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Global Trade

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Sustainability

Hydrogen Markets Progress Towards Price Transparency

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—Read the article from S&P Global Commodity Insights

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Energy & Commodities

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—Listen and subscribe to the podcast from S&P Global Commodity Insights

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Technology & Media

Global Auto Sales Forecasts: Slower EV Growth Offers Temporary Relief To Legacy Automakers

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—Read the article from S&P Global Ratings

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