Posted on 15 Apr 2020
China's finished steel exports are expected to drop sharply over May-June despite a rebound in March due to a recovery in domestic demand but weak export demand because of the coronavirus pandemic, traders said.
Steel imports are likely to continue rising through the second quarter for the same reason.
China's finished steel exports increased by 2.35% year on year to 6.476 million mt in March, the highest since July 2018, customs data released Tuesday showed. Exports rebounded in March after falling 27% year on year over January-February.
Exports in Q1 were still 16% lower year on year at 14.286 million mt.
Steel imports into China rose 26.5% on the year to 1.137 million mt in March. In Q1, imports grew 9.7% to 3.178 million mt.
As a result, China's net steel exports were down 1.64% on the year at 5.339 million mt in March, and down 21.33% on year at 11.108 million mt in Q1.
Some traders said the strong rebound in March's exports was just temporary as mills stepped up efforts to export more in March as well as in April in a bid to ease supply pressure on the domestic market. China's domestic demand was almost frozen in February as the country was in lockdown because of the coronavirus pandemic, but its steel production remained high.
The Chinese domestic demand has gradually recovered since early March, when the country largely contained the virus. However, since then the virus has spread around the world, hitting export demand hard.
In addition to weak overseas demand, Chinese steel has lost its competitive edge to other countries such as Russia, Japan and South Korea, which have lowered their export prices to competitive levels in the Asian market as the pandemic dents their domestic demand as well.
As a result, some traders said China's monthly steel exports might drop to around 3 million-4 million mt over May-June.
Market sources said the recovering domestic market combined with feeble overseas demand would boost steel imports over April-June. Some said steel imports by China would rise by 500,000-1 million mt each month in May and June from March's, mostly of slab, billet, plate and some hot rolled coil.
Overall, China's net steel exports are set to decrease significantly in the following months, which is unlikely to cause serious surplus to the domestic market, but certainly not a leeway either to ease supply pressure in the domestic market, given China's soaring steel inventories and high steel production.
Source:S&P Global Platts
