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China or Trump: What Could Drive Steel Companies in 2017?

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Part 14
China or Trump: What Could Drive Steel Companies in 2017? PART 14 OF 14

Do Falling Chinese Exports Mean Good News for US Steel?

Falling Chinese steel exports

Previously, we learned that Chinese steel production rose year-over-year (or YoY) in the first two months of 2017. 

Given the steep rise in Chinese steel production and modest demand indicators, one would have expected a tsunami of Chinese steel exports. However, that hasn’t been the case.

Do Falling Chinese Exports Mean Good News for US Steel?

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China’s steel exports fell almost 30% YoY in February. Chinese steel exports have witnessed double-digit yearly falls for six consecutive months. 

In absolute terms, February 2017 steel exports were at their lowest levels since February 2014. Lower Chinese steel exports have helped restore some much-needed sanity to international markets.

Positive for steelmakers

The European Union has slapped anti-dumping duties on some Chinese steel products. India has set a minimum import price for steel products to fend off cheap Chinese steel from its borders. As outbound locations continue to dwindle for Chinese steel products, we’ve started to see some moderation in the country’s steel exports.

Lower Chinese steel exports look promising for steelmakers such as U.S. Steel Corporation (X), ArcelorMittal (MT), and AK Steel (AKS).

Inventory

However, we also need to consider the rise in Chinese steel inventories. We saw a steep rise in China’s steel inventory between January and February 2017. Though the country’s inventory fell in March, it’s still risen handsomely on a year-to-date basis. It will be interesting to analyze China’s March steel production and demand indicators to gauge whether inventories have fallen due to lower production or higher demand.

With that said, the biggest risk for US steelmakers (NUE) (XME) could be a further slide in Chinese steel prices. Even infrastructure spending may not be of much help in that case.

Keep visiting our Steel page for ongoing updates on this industry.

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