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Tranalysis: China was facing a restructuring of steel exports, 2016

The steel export growth in China experienced a large drop in 2016. The only steel product that kept China’s steel exports rising in 2016, compared to 2015, was the export of wire rod, according to Tranalysis.

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China is the world’s biggest producer of steel with almost half of the worldwide production, according to Forbes. However, the domestic demand of steel is going down, while the production stays on a very high level. The main benefits for steel producers in China are subsidies and tax breaks.

According to Tranalysis, even with a year on year growth of steel exports by 6% in January to August 2016, the overall export growth rate has significantly dropped this period. The total amount of exports reached 76.4 million tonnes. The main reasons for the slower growth are the economic restructure in China with the resulting less steel consumption demand, as well as down slowing manufacturing investments.

During the last years in China, the exports of wire rod, plate steel, angle steel, and profile steel showed great growth rates, which led to a peak of steel exports. However, looking at the year 2016, only the export of wire rod could keep the strong growths, while the other steel products showed decreasing growth and even losses.

Another factor for slower exports can also be found in the shutdown of several steel plants in China, which are connected to the pollution issues in 2016. The Chinese government has strengthened the efforts in environmental protection, forcing many high-polluting companies to reduce or even completely cut their production.

However, even facing production cuts from China’s government, the steel production in China is still worth more than 1 billion tonnes a year. In 2016, China carried out a 45 million tonnes production cut, with plenty of space to reduce more.

The export of wire rod is the only steel product that keeps China’s steel export show an increase in 2016. The share of this material has even surpassed 40% of the total steel exports in 2016, according to Tranalysis. Back in 2012, the share was only half of 2016, namely 21.1%. The trend may strengthen China’s dependence on low-end steel exports in the future.

The steel export from China was mainly driven by a higher demand of the Middle East region. The demand from there results from the construction industry and rising oil prices, which cause more need of oil and gas equipment for manufacturers. The total export volume of steel to Middle East in Q1-Q3 reached more than 12 million tonnes. This amount represents an increase of 6.1%.

The overall export trend of steel from China shows the focus on developing countries in Southeast Asia, the Middle East, and neighbours like South Korea. Exports in these countries show a steady growth with a increasing share of exports during the last years. Industrial countries from Europe and the USA import less and less steel products from China, which is shown in a decreased share of steel imports.

Also in 2016, the exports to Europe and the USA, but also South America and Africa shoes decreasing trends. According to Tranalysis, the development is regarding to more trade protection measurements in several countries and the overall economic downturn.

What’s more, China is in a progress to switch from an industrial exports related economy to a domestic consumer orientated economy. On the one hand, the high overcapacity of steel is leading to efforts in consolidate the steel industry, on the other hand China’ real estate and construction industry is booming, leading to a domestic high-level demand for steel.

About Tranalysis:

Tranalysis is an intelligence and analysis provider on import/export data covering over 15 industries in China. Tranalysis, founded in 2001, provides users not only a large amount of import/export data in China but also analysis to help monitor the market trends. Our clients include Monsanto, BASF, Syngenta, and SinoChem.

For more information about Tranalysis, please visit our website or get in touch with us directly by emailing or calling +86-20-37616606.


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