Domestic Demand Weakens, Steel Industry Boosts Exports

The Chinese steel industry has experienced a remarkable surge in exports this year, reaching unprecedented levels particularly with its shipments to countries such as IndiaAccording to customs data, the total volume of steel exported from China in the first eleven months before 2024 hit an impressive 101.15 million tons, marking a 22.6% increase compared to the previous year.

In mid-December, the Market Research Department of the China Iron and Steel Association released statistics highlighting that between January and October, China's exports to ASEAN member states amounted to 28.22 million tons, reflecting a 29.3% riseNotably, exports to Vietnam rose significantly to 10.98 million tons, an increase of 3.79 million tons, or 52.8%. The Middle Eastern nations, specifically the Gulf Cooperation Council (GCC) countries, also saw an influx of Chinese steel, with a total of 9.82 million tons exported—up 38.7% year-on-year

Furthermore, exports to African Union nations increased by 30.5%, with an additional 2.48 million tons shippedAfter a dip in September, there was a resounding rebound in Chinese steel exports to both South Korea and India in October.

Steel demand in India remains robust, bolstered by accelerated economic growth and the initiation of new infrastructure projectsRecent data issued by the Indian government shows that between March and November 2024, the volume of finished steel imported from China reached an all-time highIndia, now the second-largest crude steel producer globally, has transitioned into a net importer of finished steel during this financial yearThe total imports of finished steel in India soared to 6.5 million tons, reflecting a year-on-year increase of 26.6%. Exports from China accounted for 1.96 million tons, over 30% of the total, alongside a growth rate of 22.8%. This figure embraced a wide array of products, including stainless steel, hot-rolled coils, plates, electrical steel, and galvanized sheets, pipes, bars, and rods.

Notably, Japan has also ramped up its finished steel exports to India, with figures from April to November indicating a nearly six-year peak, as import volumes doubled to 1.4 million tons

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Together, China, Japan, and South Korea contributed to a staggering 79% of India's total finished steel imports during this timeframe.

For Chinese steel enterprises, exporting has emerged as a crucial pathway amid the more adverse conditions facing the domestic market todayThe steel market has faced a challenging epoch since 2015 when oversupply marred the industry, leading to heightened scrutiny regarding profitability and sustainabilityBy the third quarter of 2024, the steel sector was grappling with a substantial low point, revealing widespread losses.

BaoSteel, one of the top performers in the national steel sector, reported a cumulative profit of 8.23 billion yuan for the first three quarters of 2024. During a recent earnings call, executives indicated a slight decline in total domestic steel demand, with a noticeable drop in construction steel requirements while manufacturing steel demand remained steady

Within the manufacturing realm, sectors like shipbuilding, automotive production, and home appliances have shown optimistic demand, contrasted with a low demand in engineering machineryIn response to the downturn in some downstream sectors, the company has actively pursued overseas markets to leverage export opportunitiesIn fact, BaoSteel achieved a historic high in export contracts, reaching 4.66 million tons during the first three quartersMost of these exports were directed to Southeast Asia and South Asia, accounting for 35% of total exports, while 27% were shipped to Europe, Africa, and the Middle East, and approximately 20% to East Asia and Australia, with the Americas taking 16%.

Interestingly, while export volumes surged, prices have been on the decline, leading to a paradox of increasing quantity but decreasing revenueCustoms statistics indicate that although steel exports rose by 22.6% in dollar terms over the first eleven months, the export value itself dropped by 2.0%.

Looking ahead, the China Iron and Steel Association's Market Research Department anticipates that December 2024 will maintain high export levels for steel products

Currently, China faces 27 trade remedy investigations, underscoring the necessity for steel enterprises to balance short-term gains and long-term sustainability while navigating and sustaining their export operations.

The persistent slump in the real estate market poses significant challenges for the steel industry, characterized by a decrease in real estate development investment and fewer new projects, leading to a stark downturn in steel demandNonetheless, the vigorous push in infrastructure development has emerged as a vital support mechanismThe initiation of numerous construction projects in transportation, energy, and other sectors has resulted in substantial steel consumptionThe automotive industry—driven by technological advancements and consumer demand—continues to experience stable production growth, heavily relying on various high-quality steel types, thereby positively impacting overall steel demand

The shipbuilding sector remains buoyant due to the global trade transportation needs, with new ship orders on the rise continuously increasing the demand for marine-grade steelIn the realm of exports, despite stiff international competition, there remains a semblance of relief from domestic steel capacity pressures.

Looking toward 2025, infrastructure investments are expected to sustain their scale, providing a stable foundation for steel demandThe continued advancement of the automotive sector is anticipated to further drive the consumption of automotive steelThe shipbuilding industry, alongside expanding marine economic activities, is likely to maintain substantial demand for steelMachinery manufacturing is also projected to uphold consistent demand levelsHowever, the real estate sector's slow recovery will likely limit its potential uplift on overall steel demandAdditionally, the increase of tariffs in various countries presents additional hurdles for Chinese steel exports, constraining growth and diminishing the role of exports in upholding national steel demand