【Steel Export Special】Tariff barriers suddenly arise, steel exports will peak and decline
In the past two years, China's real estate industry has been in a downward cycle.
Infrastructure, as a countercyclical economic adjustment tool, has limited role in driving steel demand under the pressure of debt reduction.
Insufficient domestic demand for steel has led to overcapacity in the steel industry again;
the supply of steelmaking raw materials is loose on the cost side, and coal prices have hit new lows.
With the low-cost and low-price advantages formed by large-scale production, my country's steel has gained strong competitiveness
in overseas markets, partially filling the gap of insufficient effective demand for real estate and infrastructure.
From 2023, my country's steel exports have increased significantly, and the proportion of domestic total demand has increased significantly.
At the same time, the large-scale export of low-priced steel has caused concerns in some countries and regions, and the number of
anti-dumping investigations against my country's steel has continued to increase. So far, there are nearly 30 anti-dumping cases under
investigation. In addition, after taking office, US President Trump launched a tariff war again. On March 12, US President Trump's move
to impose a 25% tariff on all steel and aluminum imported into the United States officially took effect. On March 26, Trump signed an
executive order at the White House, announcing a 25% tariff on all imported cars and taking effect on April 2.
Anti-dumping and US tariffs are important factors affecting my country's direct (indirect) steel exports this year. According to calculations,
under an optimistic scenario, my country's direct and indirect steel exports are expected to decrease by 6.85 million tons month-on-month,
under a neutral scenario, and under a pessimistic scenario, it is expected to decrease by 35.08 million tons month-on-month.
1. Current status of China's steel exports
In 2024, my country's terminal steel demand fell by 1.5% month-on-month, of which real estate steel demand fell by 22% month-on-month,
while net steel exports rose by 28% month-on-month, accounting for 10% of my country's total steel consumption. In 2023 and 2024,
my country's steel exports will be 90.26 million tons and 110.72 million tons respectively, an increase of 22.8 million tons and 20.46 million
tons month-on-month, an increase of about 36.2% and 22.7%, maintaining a rapid growth momentum for two consecutive years.
In terms of categories, plate has the largest increase, with an increase of 16.65 million tons and 15.03 million tons in the past two years,
accounting for more than 70% of the total increase in steel exports.
In terms of regions, Southeast Asian countries have always been the main export area for my country's steel, accounting for about 30% of
my country's total exports. Last year, the increase in steel exports from Southeast Asia was about 6.84 million tons. In addition, the export
volume in the Middle East has been steadily increasing since 2022, and last year's export increase was about 4.23 million tons, second only
to Southeast Asia. The export area is subdivided into countries, and it can be seen that the export increase in Vietnam, the United Arab Emirates,
Saudi Arabia, Iraq, Egypt, Indonesia, Brazil, the Philippines, Pakistan, Taiwan and South Africa was relatively stable or increased month-on-month
last year, but the export increase in Turkey, India and South Korea declined significantly.
2. Main factors for the increase in steel exports
Driven by the supply-side structural reform, the price up cycle experienced by my country's steel market reached its historical peak in October 2021.
Later, as the domestic real estate industry entered a period of deep adjustment, coupled with the impact of the Fed's interest rate hike cycle on the
global commodity market, the supply and demand relationship in the domestic steel market gradually turned to easing. During the period of
2022-2024, the center of gravity of my country's steel prices continued to move downward, with a cumulative decline of more than 30%, and the
international price advantage gradually emerged. At present, the FOB price of hot-rolled coils in China is US$467/ton, which is about US$15/ton
lower than the CFR price in Southeast Asia, about US$393/ton lower than the CFR price in the United States, about US$143/ton lower than the CFR
price in the EU, and about US$33/ton lower than the CFR price in the eastern region.
3. Summary of anti-dumping investigations and potential impacts
From 2024, the number of overseas anti-dumping investigations has increased, and new anti-dumping investigations have been filed almost every
month, which is very similar to 2015. It generally takes more than 6 months from filing to preliminary ruling. The last round of anti-dumping was
implemented in 2016, while the peak period of this round of anti-dumping is roughly in the middle of this year.
The last round of anti-dumping investigations was implemented in 2016, but from Figure 10 we found that there was no obvious reduction in steel
exports that year, only a month-on-month decrease of 3.47%, a total of 3.9 million tons. The reason may be that there is no export substitution in
the world. In 2016, world steel demand increased by 1% month-on-month, and crude steel production increased by 0.49% month-on-month. The
change in the global steel supply and demand balance is more favorable to the supplier. As the largest steel exporter, China's international share of
net steel exports has basically remained above 30% (except during the epidemic). At this time, changing the international steel export structure,
net steel importers need to bear considerable upward pressure on trade costs. Under this pressure, we speculate that traders will seek various ways
to circumvent policy restrictions, such as re-exporting and adjusting export varieties.
According to the World Steel forecast, global crude steel production will increase by 1% in 2025, steel demand will increase by 1.14% in 2025, and
the world steel supply and demand balance will fluctuate similarly to 2016. In 2023, my country's net steel exports will exceed 47%. It will cost a
lot to adjust the export structure without a net increase in global steel supply. It is expected that steel mills and traders will seek various ways to avoid
the suppression brought by anti-dumping duties. Therefore, we predict that the anti-dumping investigation will accelerate the peak of my country's
steel exports before it is concentrated, and the huge cost of structural adjustment will reduce the export reduction.
