China's Steel Production Soars in 2023, Thanks to Solid Exports and Unwavering Domestic Demand!

Surge in Steel Exports Spearheads China's Production Amid Domestic Demand Plateau

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China's steel sector is buzzing with activity as robust exports have surfaced as a substantial pillar supporting steel production, especially when the domestic demand, majorly driven by the property sector, has been on a quieter side throughout this year.

Apart from exports, the sturdy demand emanating from China's infrastructure and manufacturing realms has played a pivotal role in keeping the steel production buoyant in the nation, as per industry insiders.

Steel Exports: A Strong Pillar

The period between January to August witnessed China's net exports of semi-finished and finished steel surging to 651.88 million mt, a substantial rise of 19.84 million mt from the same timeframe in 2022, as revealed by the data from China's customs on September 21.

Simultaneously, the country's crude steel production soared to 712.93 million mt, marking an increase of 18.07 million mt compared to last year, as per the latest figures from the National Bureau of Statistics.

The vigor in steel exports has even outpaced the production growth, indicating that the additional steel production this year has found its way to overseas markets, commented an export trading source.

Despite the global steel demand showing signs of lethargy, the enticing price points of Chinese steel, along with the push towards "Belt and Road" initiatives, have propelled China's steel exports into a robust stance in 2023.

However, a slight pullback in steel exports might be on the horizon in September-October from the August figures, albeit remaining quite spirited in comparison to the same months last year, trade experts suggest.

With the Chinese administration likely to be lenient on steel output reductions for 2023, mindful of economic growth concerns, the downtick in China's crude steel production in the upcoming months might be gentler than the previous year. This scenario could cap the upward trend in Chinese steel prices while favoring the country's steel exports, added the experts.

Steadfast Domestic Demand

S&P Global Commodity Insights, after crunching the numbers, highlighted that the Chinese domestic steel apparent consumption remained almost static at 651.88 million mt from January to August, compared to the corresponding period last year.

Despite a significant dip in new property constructions in 2023, the robust activities in infrastructure and manufacturing - notably in automobile, shipbuilding, and new energy facilities, have helped in neutralizing the sluggishness from the property segment, mentioned a source from an eastern China mill.

While a substantial dip in domestic steel demand appears unlikely, courtesy of governmental strategies to rev up infrastructure and consumption, a pronounced growth in home market demand seems distant unless the property market recuperates and consumer assurance rekindles, opined some trade and mill insiders.

The high-octane steel production this year has indeed put a dent in Chinese steel profit margins. However, the scenario of oversupply hasn't reached alarming levels, and steel inventories remain in check due to solid exports and a fairly consistent domestic demand, shared another mill source. They envisage this delicate equilibrium between supply and demand could endure provided China's steel exports maintain their vigor.

As per data, the Chinese domestic HRC sales profit margins have averaged at a negative $4/mt in 2023, a downturn from an average of $14/mt during the same period in 2022, as shown by S&P Global data.

The Semi-finished Steel Trade Landscape

The China Customs data shed light on the fact that semi-finished steel exports touched 259,000 mt in August, marking a 0.5% monthly rise and an over five-fold increase annually. During the first eight months, the semi-finished steel exports showcased a 147% hike compared to the same period last year, clocking in at 2.192 million mt.

August saw the total steel exports, encompassing semi-finished and finished steel, burgeon by 12.9% monthly and 37.9% annually to reach 8.541 million mt.

From January to August, China's exports of semi-finished and finished steel ascended by 30.6% annually to 60.977 million mt.

On the flip side, semi-finished steel imports in August surged by 72.5% monthly but remained 36.7% lower annually at 311,000 mt, as per the data from China Customs.

The total imports of semi-finished and finished steel during the initial eight months plummeted by 45.1% annually to 6.748 million mt.

Consequently, China’s net exports of semi-finished and finished steel in January-August amplified by 58%, or 19.839 million mt, annually to 54.229 million mt.

Source : Platts