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Robust steel exports from China have emerged as a major driver supporting steel production at a time when demand activity from the country's largest steel consumer -- the property sector -- has remained muted for the most part of this year.
Strong exports support production
During January-August, China's net exports of semi-finished and finished steel totaled 651.88 million mt, up 19.84 million mt from the same period of 2022, China's customs data showed Sept. 21.
Over the same period, China's crude steel production reached 712.93 million mt, up 18.07 million mt from a year earlier, the latest data from the National Bureau of Statistics showed.
"The growth of steel exports even exceeded the growth of production, suggesting the incremental steel production so far this year has been consumed by overseas markets," one export trading source said.
Some market sources said overall global steel demand had been sluggish, but competitive Chinese steel prices, coupled with efforts to boost the "Belt and Road" projects, led to robust exports from China so far in 2023.
However, China's steel exports might retreat in September-October from August level but remain relatively high compared with the same period of last year, according to trading sources.
Resilient domestic demand
According to calculations by S&P Global Commodity Insights, the Chinese domestic steel apparent consumption reached 651.88 million mt over January-August, almost unchanged from a year earlier.
The apparent consumption equals crude steel output minus net exports and increased steel inventory, and thus reflects the amount of steel actually consumed domestically.
"Although the property new home starts (the biggest steel demand driver) still fell sharply in 2023, but infrastructure and manufacturing - especially cars, ships and new energy facilities, have managed to offset much of the drag from the property sector," one eastern China's mill source said.
However, while the Chinese domestic steel demand is unlikely to have any significant drops given the government's efforts to boost infrastructure and consumption, it is hard to see much demand growth in the home market either before the property sector bottoms out and consumer confidence returns, some trading and mill sources said.
"High steel production has squeezed the Chinese steel profit margins hard this year. But I have to say oversupply has not been serious and steel inventories are currently not high, thanks to strong exports and more or less stable domestic demand," another mill source said. He added the fragile balance between supply and demand might continue as long as China's steel exports stay strong.
The Chinese domestic HRC sales profit margins averaged at minus $4/mt so far in 2023, down from an average of $14/mt in the same period of 2022, S&P Global data showed. fastmarkets
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