What Strength in Chinese Steel Prices Could Mean for US Steel
Chinese steel prices
China has long been blamed for the global steel industry’s woes. As China’s steel mills flooded international markets with cheap steel, steel prices tanked globally. That prompted many countries to impose trade actions against Chinese steel imports. Notably, China’s steel overcapacity was even mentioned in this year’s G20 (Group of 20) meeting.
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However, 2017 looks like a different ball game for Chinese steel mills. Supply-side reforms and better-than-expected demand have boosted Chinese steel prices this year. According to Antaike, the average hot rolled coil prices in China have risen more than 10.0% this year. Prices have risen almost 40.0% from their April lows.
Cause of worry?
While prices have risen too fast for comfort, Chinese authorities seem to be worried. According to China Daily, citing the CISA (China Iron and Steel Association), “Steel products’ price surge is not due to strong demand or inadequate supply but speculative trading by some unscrupulous market players.” The report also said that “government policies on steel overcapacity reduction, elimination of inferior steel and environmental protection have been over-interpreted and even misunderstood by the market.”
However, despite such statements, Chinese steel prices haven’t seen any major downward pressure, as you can see in the graph above. Higher Chinese steel prices, coupled with the fall in the country’s steel exports, are positive for U.S. Steel Corporation (X), AK Steel (AKS), and ArcelorMittal (MT).