China’s February steel production
China’s steel production is a key indicator that investors in steel companies including U.S. Steel (X), AK Steel (AKS), Nucor (NUE), and Steel Dynamics (STLD) should closely track. Higher Chinese steel production only adds to the glut of steel in the international markets. In this part of the series, we’ll explore how much steel China (FXI) produced in February.
China produced 58.5 million metric tons of steel products in February according to the data released by the World Steel Association. This represents a year-over-year (or YoY) decrease of 4%. However, while Chinese steel production fell 4% YoY in February, there was no respite on the steel exports front. In February, China exported 8.1 million metric tons of steel products, a YoY increase of 4%.
The graph above shows the monthly change in China’s steel production and exports. For the last few months, Chinese steel exports have not fallen in line with the production slowdown. Chinese steel demand could actually be contracting at a much faster rate than many are anticipating. This demand-supply mismatch means that Chinese steel exports will continue to flood global markets. While China has vowed to cut its excess steel capacity, we need to see visible curtailments in the country’s steel production for sanity to return to international steel markets.
Note that the US has slapped anti-dumping duties on several steel products in the last six months. However, is the impact of trade actions visible in US steel imports? We’ll find out in the next part of the series.