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Outlook for Chinese Steel: Implications for US Steel


Dec. 4 2020, Updated 10:52 a.m. ET

Chinese steel industry

China is the world’s largest steel consumer, steel producer, and steel exporter. The country dominates the global steel markets probably like no other country ever has. Several regions such as the United States, the European Union, and India have acted decisively against Chinese steel exports, but China remains the key driver of global steel prices (NUE) (CLF). Simply put, US steel producers’ fortunes are still somewhat tied to the outlook for the Chinese steel industry. Let’s see what the outlook for China’s steel industry is and look at the implications for steelmakers such as U.S. Steel (X), ArcelorMittal (MT), and AK Steel (AKS).

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Chinese steel exports

Over the last couple of years, China has been blamed for the global steel glut. Its rising steel exports flooded the international markets amid a tepid domestic demand. We also saw China’s steel prices fall due to massive overproduction and a weak demand offtake.

However, in some ways, the tide has turned for the Chinese steel industry. The country is producing steel at record levels while exports have fallen steeply, as you can see in the above graph. At the same time, Chinese steel prices have staged a smart rebound in 2017 and are outperforming steel prices in several regions, including the United States. The sharp increase in Chinese steel prices is now worrying China since higher steel prices could potentially spur the country’s inflation.

Before we look more at Chinese steel, we need to understand the country’s demand-supply dynamics. In the next part, we’ll see which sectors are supporting Chinese steel demand this year.


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