Chinese Steel Exports Rose, Domestic Demand Fell

China is the world’s largest steel exporter. Globally, several steel companies blame higher Chinese steel exports for their woes. However, Chinese steel exports fell on a yearly basis for three years after peaking in 2015. Following global backlash due to China’s steel exports and rising pollution levels, the country cut some of its excess steel capacity.

So far, 2019 has started on a different note for Chinese steel exports. The country exported 6.19 million metric tons of steel last month—the highest level since June. The exports rose 33% YoY (year-over-year) and 11.3% sequentially. However, the sharp YoY rise in China’s January steel exports is coming from a lower base. In 2018, China’s steel exports in January were the lowest level since February 2013.

China’s steel demand growth has moderated. Leading steel end consumers, like the real estate and automotive sectors, have seen moderating growth. On the supply side, last year’s production cuts were reportedly less intense compared to 2017.

From US steel companies’ perspective (CLF), rising Chinese steel exports could put more pressure on global steel prices, which could depress US steel prices. US steel prices fell sharply in the fourth quarter. Since the prices were higher in the first half of the year, U.S. Steel (X) and AK Steel (AKS) reported a yearly rise in their 2018 earnings. Nucor (NUE) and Steel Dynamics (STLD) posted record earnings last year. Read Steel Companies’ Q4 Earnings: Gains and Losses for a comparative analysis of steel companies’ fourth-quarter earnings.

Next, we’ll discuss China’s aluminum exports in January.