China’s Steel Exports Are Growing But Here’s Why That Won’t Last

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(Bloomberg) – China’s steel exports have exploded. History suggests it won’t last long.

Steel producers in the world’s largest producer are heavily dependent on overseas sales for cash generated by the country’s decades-long supply crisis. But they are faced with rejecting accusations from importers and protector Donald Trump will soon return to the White House. The escalation of unrest is beginning to resemble the last trade crisis in the industry nearly a decade ago.

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Unless Beijing rips up its current playbook and decides to reinvigorate the housing market or splurge on infrastructure, China’s steel consumption is in long-term decline. But the mills don’t cut the product enough to match that fact. The result is a near record shipment. More than 11 million tons were shipped last month, a nine-year high.

Investors worry that Trump’s re-election will trigger another trade war. Even though China does not sell much alloy to the US directly, protectionism could rise though global steel markets and stifle global trade. Analysts at ANZ Group Holdings Ltd. they think Chinese mills could ‘drive forward’ any tariff hike by increasing exports even more in the next few months, according to a note from the bank last week.

Here are five charts that show how China’s exports may progress to the top spot.

History Lesson

Chinese steel has a history of causing 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 is any guide, expect sales to drop significantly.

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“China’s steel exports may begin to decline by the end of 2026 as many trading partners tighten export controls and overall steel production declines,” said Bloomberg Intelligence analyst Michelle Leung.

Economic Development

China exports most of its steel to nearby developing countries that still need to build high-quality infrastructure. Nations in Southeast Asia, South Asia and the Middle East have seen significant increases in imports this year and many are partners in Beijing’s Belt and Road Initiative.

But even those countries are flooded and have increased trade barriers. That spells trouble for Chinese steelmakers because it shows how saturated the market has become. And it will only cost the mills if they are forced to move farther.

The Vietnamese Boom

China’s huge overseas market is a case in point. “When China’s hot coil traders look at the world, they’re not so worried about Trump, they’re worried about Vietnam,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd.

It is one of the countries that have pulled the drawbridge after being overwhelmed by China’s iron ore. But Vietnamese traders have also responded by boosting exports to offset the steel piled up there, worsening the global glut in a version of the whack-a-mole steel market.

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A Threat to the Neighborhood

Some neighbors are not happy either. Exports from Japan and South Korea have shrunk in competition with China, while their domestic markets are also threatened by an influx of steel.

Japan wants to expand its anti-dumping measures to catch Chinese steel being shipped to third countries, while South Korea has launched an investigation into imports of stainless steel plates as it files complaints about products made in China being sold below market value.

“The increase in affordable Chinese steel has created challenges for Japanese and South Korean producers, leading to lower market shares and profits,” said Martina Reber, research manager at Pala Investments Ltd.

Volume Over Value

Exports have been crucial to keeping Chinese mills afloat because there is not enough domestic demand to keep up with the 1 billion tons of annual production. Now, cheap Chinese steel is pulling across the market. Rivals range from European steel giant ArcelorMittal SA to Japan’s Nippon Steel Corp.

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Chinese steel products are often 10% to 20% more expensive than those of other major producers such as Japan and South Korea, according to Pala’s Reber. But there are worrying signs in other places like India and the Philippines, where China’s exports have fallen as tonnage has risen.

More broadly, the volume over value strategy will be problematic for Chinese mills if exports cannot keep pace.

On the phone

Xi Jinping used his last meeting with Joe Biden to send a clear message to Donald Trump: China wants to be friends, but is ready to fight if necessary.

Aluminum jumped on Friday after China said it would cancel a tax break that helped prop up decades of exports and protect an industry prone to overcapacity.

Angolan crude for December shows weak demand from China.

Weekly Diary

(Always in Beijing unless otherwise noted.)

Monday, Nov. 18:

• China’s October data on exports of base metals and oil products
• China’s 2nd quarter trade data for Oct., including agricultural imports; LNG and pipeline gas imports; the collapse of trade in oil products; alumina, copper and rare earth exports; bauxite, iron and aluminum for imported products
• China Intl Lithium Conference in Chengdu, Sichuan, day 1
• China Intl PV and Storage Conference in Chengdu, Sichuan, 2nd day

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Tuesday, Nov. 19:

• China Intl Lithium Conference in Chengdu, Sichuan, day 2
• China Intl PV and Storage Conference in Chengdu, Sichuan, 3rd day

Wednesday, Nov. 20:

• China sets monthly loan rates, at 09:00
• The third set of China trade data for Oct., including a country breakdown of energy and goods
• CCTD weekly online forum on Chinese coal, 15:00
• China Car Charging and Battery Replacement Conference in Taiyuan, Shanxi, day 1
• The China Intl Lithium Conference in Chengdu, Sichuan, on the last day
• China Intl PV and Storage Conference in Chengdu, Sichuan, on the last day

Thursday, Nov. 21:

• China Car Charging and Battery Replacement Conference in Taiyuan, Shanxi, 2nd day

Friday, Nov. 22:

• Weekly iron ore ports in China
• Shanghai exchange weekly commodity collection, ~15:00
• China Car Charging and Battery Replacement Conference in Taiyuan, Shanxi, last day

—With assistance from Grace Sihombing, Ditas Lopez, Kok Leong Chan, James Mayger and Martin Ritchie.

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