China's steel exporters expect slower seaborne sales for the remainder of 2019, as trade tensions and higher domestic demand keep more of it home.
Chinese exporters geared up spot seaborne sales last spring to protect market share but are now showing less appetite for sales amid narrower profit margins. Rising feedstock costs and limited upside in steel prices have left Chinese mills more price sensitive and unable to discount further in the face of increased competition into battleground regions. Steel exports from Qatar, India, Turkey and Malaysia are displacing Chinese sales into Asean countries.
"Chinese export volumes should decrease this year as the government increases investment on infrastructure, which can absolutely support its domestic demand," an east China-based mill official said. His company is not encouraging steel exports. "It will be a tough year for exporters" with the heightened trade tensions with the US and wild swings in the yuan-US dollar exchange rate, he said.
Another mill exporter, who at the start of 2019 expected volumes to slightly increase, now forecasts export volumes to remain flat or fall slightly.
Its April steel exports fell by 2.3pc to 6.33mn t from a year earlier, the fourth decline in six months. January-April exports rose by 8.3pc to 23.35mn t, for an annualised pace of 70mn t/yr that was marginally flat to the 69.15mn t exported in 2018.
China's steel exports have seen a multi-year decline since peaking at 112mn t in 2015. China's efforts to reduce pollution and shut down illegal mills, as well as sustain economic stimulus to support domestic demand, have kept its steel prices firm. More trade cases against China have also weighed on its exports.
US steel tariffs and quotas, EU import quotas and other trade barriers have left global steel exporters with fewer options. Slower domestic consumption in Turkey and Malaysia has freed up more of their steel for spot sales to Asia. Qatar — cut off from trade with its neighbours by a diplomatic crisis — has also targeted Singapore for rebar sales.
Global steel markets are worried that a 10pc growth in Chinese steel supply this year will require seaborne markets as an outlet to keep their domestic markets in balance. But Chinese mills and traders said domestic demand is strong enough to absorb that supply.
"Chinese export volumes will definitely decrease," a Chinese trader said. "The key factor pushing Chinese mills to export this year is the pressure to supply the domestic market, instead of maintaining export market share."
