Steel Exports From China Drop After Rally in Local Price and Demand Surged

Steel exports from China fell in April after local prices and demand surged, curbing the incentive for mills in the top producer to seek overseas sales and easing the challenge for suppliers in Europe and the U.S.

Shipments dropped to 9.08 million metric tons from 9.98 million tons in March, according to data from the General Administration of Customs on Sunday. Still, the April figure took exports over the first four months to 36.9 million tons, 7.6 percent more than a year earlier.

Steel prices have rallied in China this year as the property market rebounded and local investors piled into raw-material futures. The upsurge revived mills’ profit margins, and curbed their need to seek increased income from markets outside China. The decline in steel shipments in April came as the nation’s total exports stabilized.

“Local demand is so strong that prices in the domestic market are much more expensive than overseas,” Wei Yingsong, analyst at Mysteel, said by phone from Shanghai before the data was released.

Last year, steelmakers in China shipped a record 112 million tons overseas, sending the global market into a tailspin as profits and prices collapsed. This year, the sales may ease to 100 million tons as local demand strengthens, according to an estimate from the China Iron & Steel Association.

Rebar Rally

Steel reinforcement bar, used to strengthen concrete, has soared 31 percent in 2016 after dropping for five years. Prices that rallied to as much as 2,787 yuan ($429) a ton in April, the highest since September 2014, have since dropped back to 2,329 yuan as exchanges took steps to curb the speculative frenzy.

Iron ore imports totaled to 83.92 million tons in April compared with 85.77 million a month earlier, according to customs figures. Over the first four months, purchases of ore were 325 million tons, about 6.1 percent more than in the same period of 2015. China is the world’s largest buyer of seaborne iron ore, and its mills account for about half of global steel supply.

ArcelorMittal, the biggest steel-producing company, cautioned last week that while it saw a broad recovery in the global market, Chinese prices may have overshot and could fall back. Risks remained in China because fundamental overcapacity still existed, Chief Financial Officer Aditya Mittal told reporters as the Luxembourg-based company reported a drop in quarterly earnings.

News By : Bloomberg
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