The latest news out of the steel industry is that China’s steel exports drop for the 4th straight month. In November, Chinese exports of steel dropped 16% compared to a year ago to 8.12 million tons.¹ According to Bloomberg, there is little chance that exports catch last years 12 month record. If this plays out it will be the first year China’s steel exports contract since 2009.
China is responsible for about half of the world’s output of steel. Since domestic demand slowed, China has been flooding the markets with excess product. Around 15% of China’s steel demand comes from housing.¹ Throughout this year though the U.S, Europe, India and others imposed tariffs and trade measures in hopes to protect their own local markets.
The combination of falling exports and slower housing demand is likely to lower steel prices in China and erode margins of its steel mills, which had returned to profitability this year. -Rajiv Biswas chief Asia-Pacific economist for IHS¹
Steel output in China is expected to be cut by 150 million tons by 2020 as the country enters a program to pare back capacity. Nearly 25% of China’s steel-production capacity is excess.¹