Winners and Losers as China’s Steel Exports Cool Off

China’s steel overcapacity hasn’t gone over well with its trading partners. Earlier this year, President Donald Trump imposed tariffs on steel imports in a bid to protect US manufacturers (DIA).

In this article, we’ll discuss China’s November steel export data and see whether tariffs and the ongoing trade conflict between the United States and China are affecting steel exports.

In November, China exported 5.3 million tons of steel products, implying a decline of 3.7% sequentially. China’s steel shipments for the first 11 months of the year fell ~9% to 63.8 million tons. This decline in exports came despite the depreciation in the Chinese yuan. Thus, the decline underlined a structural phenomenon, most likely driven by higher tariffs by the United States and other countries.

US steel and iron ore companies such as U.S. Steel Corporation (X), AK Steel (AKS), Cleveland-Cliffs (CLF), and Nucor (NUE) see Chinese steel overproduction and exports as a major challenge.

While a decline in steel exports from China has been benefiting US steel producers and Cleveland-Cliffs (CLF), which produces iron ore pellets, weaker steel export growth has negatively impacted the steel industry in China. The impact is also negative for iron ore miners, including Vale (VALE) and BHP (BHP).

China’s steel overcapacity isn’t getting an outlet elsewhere, and amid a slowdown in domestic demand, steel prices have been in correction mode. This development is negatively affecting iron ore imports as well.

China’s steel sector is under stress mainly due to weakening domestic demand, as we’ll see in the next article.