16 Oct

While Chinese Steel Exports Fall, Domestic Steel Lags

WRITTEN BY Mohit Oberoi, CFA

Chinese steel exports

The Chinese steel industry, which has been cited as a source of disruption in global steel markets (MT), is outperforming most other regions this year. Chinese steel prices have outperformed steel prices in several other regions—including the United States (IWM) (RUT-INDEX).

While Chinese Steel Exports Fall, Domestic Steel Lags

China exported ~5.1 million metric tons of steel products in September, which is 41.5% lower than in September 2016. This data looks encouraging for several reasons.

Firstly, September marks the 13th consecutive month in which Chinese steel exports have registered a yearly decline. Also, the percentage decline is the highest we’ve seen over the last 13 months.

In absolute terms, China’s September steel exports are the lowest since February 2014. If we exclude February, when exports could be lower due to the Lunar New Year holiday, the country’s September steel exports are at their lowest since November 2013.

Another interesting aspect to consider is that in September 2015, Chinese steel exports hit an all-time high of 11.3 million metric tons. Chinese steel exports are currently down to less than half of peak values.

Impact on U.S. Steel

Ideally, falling Chinese steel exports should mean an improved environment for companies like U.S. Steel (X), AK Steel (AKS), and Nucor (NUE). Despite the steep decline in Chinese steel exports, we’ve seen a spike in US steel imports this year.

According to the United States Census Bureau, US steel imports have risen on a yearly basis for ten consecutive months. Lower Chinese steel exports have meant little for U.S. Steel as domestic steel imports have refused to subside despite several trade actions.

In the next article, we’ll look at China’s September aluminum exports.

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