China’s steel exporters were doubtless disappointed that the country’s steel exports during 2018 registered another on year fall albeit by only 8.1% last year, compared with the 30.5% plunge seen in 2017.
The latest General Administration of Customs (GAC) data showed total steel exports reached 69.3 million tonnes in 2018, off by 6.1 million tonnes from 2017. Within the total, exports of flat products decreased by 6.9% on year to 40.23 million tonnes, the latest data published on January 24 showed.
But industry insiders weren’t surprised. China’s steel market remained robust for most of last year, with domestic steel prices keeping relatively high throughout the year, thanks to cuts in installed capacity mandated by the central government, and production curbs imposed on steelmakers in much of northern China as local governments battled air pollution. As a result, steelmakers and traders had limited interest in exporting.
South Korea, for example had been China’s largest steel export destination in 2017 but during January and November last year, Chinese steel shipments there declined by a huge 38% to 6.62 million tonnes on year, the Customs data showed.
South Korea’s economy struggled last year GDP growth reached 2.7%, down from 3.1% in 2017 and was slowest for six years and Chinese steel prices were unattractive to Korean Steel Consumers.
But another reason why Korea bought less Chinese steel last year is that domestic producers substantially lifted their production. Korea Iron and Steel Association data shows Korea’s crude steel production reached an all-time high of 72.5 million tonnes last year.
“It is no surprise that the steel exports last year continued to decrease when most suppliers enjoyed better profits from domestic market sales in 2018 than for export orders, and the plummet in exports to South Korea was not an exception,” a Shanghai-based steel exporter said.
But there were some lights in the gloom. China’s steel exports to the Philippines, Malaysia, and Thailand over last year’s January-November period all showed double-digit growth of 13.3%, 13% and 10.4% respectively, compared with the exports for 2017, according to GAC data. Moreover, some Chinese mills benefited from export business associated with Beijing’s “Belt and Road Initiative” (BRI) and could avoid the downtrend other Chinese exporters faced.
GAC did not provide a breakdown of steel export volumes to BRI countries, but the experience of Inner Mongolia Baotou Steel Union (Baotou Steel) might be fairly representative. Baotou Steel’s export volume in 2018 was up 35% year on year at 2.01 million tonnes, some 91% of which 1.64 million tonnes consisted of steel exports to 46 countries in the list of BRI countries, the mill’s official Wechat post said.
“Thanks to Beijing’s policy of promoting cooperation with these BRI countries, we can satisfy firm demand from overseas markets and enjoy favourable prices to support steel exports to these areas,” an official from Baotou Steel’s international trading subsidiary commented.
Baotou Steel, as the Shanghai-listed arm of Baogang Group, also credited the increase in exports to BRI Countries as a key contributor to its higher profits last year. While its business figures for the past year are still to be finalised, the company predicts these will show its net profit rocketed by 45.5% on year to Yuan 3 billion ($441 million), the latest post said on January 25.