During the first nine months of this year, China’s exports of rolled steel products reached 27.36Mt. This is 3Mt (12.3%) up on the figure for the equivalent period in 2011. This was achieved against the backdrop of lower output of steel in the rest of the world.
UK based steel market analysts, MEPS say there are several reasons for this increase. The main one is that Chinese steel has been more price competitive. Secondly, the quality of commercial grade steels is now acceptable for most applications around the world. Furthermore, demand from the countries with a shortfall in supply continues to grow. These nations have obtained their requirements in the past from Chinese steelmakers, and are expected to continue purchasing from this source.
Average rolled steel prices, in the main Asian consuming nations, have been $US200/t above those in China for all the year. In recent months, the figure has moved to over $US250/t. Such differences provided ample opportunities for the mills in China to cover all the costs of administration, freight and local transport to their foreign customers.
For most of 2012, the MEPS ‘all products’ rolled steel prices for North America and China showed an average differential of $US300/t - mainly created by declining prices in China. With such wide discrepancies, steel trade between the two regions has increased, year on year.
The picture in the European Union has been quite different so far in 2012. The differential between the MEPS composite price in the two regions has been below $US200/t. This has proved to be too small for many traders to complete deals. While the cost of freight, local transport and administration can be covered by this differential and regular deals are being concluded, the extended delivery lead times and potential for falling prices in the EU has limited the number of casual deals taking place.
One thing is certain. China’s steel industry will pose a threat to producers worldwide in years to come. The steel quality risk for importers is reducing. Chinese steel prices are the lowest in the world. China is geographically close to the growing markets in Asia. Close scrutiny of regional price differentials is essential in understanding the threat.
Source: MEPS China Steel www.meps.co